Tax liability insurance

[webberg]

You need to make sure what is insured.

We see a lot of "IR35 cover" offers. On investigation this turns out to be insurance for the cost of an enquiry into IR35 rather than cover for the tax liability.

We also see some instances of the insurer taking one look at the evidence available to resist an IR35 status enquiry and offering the insured a pay out rather than actually defend the claim.

be careful.

[pr1]

You need to make sure what is insured.

We see a lot of "IR35 cover" offers. On investigation this turns out to be insurance for the cost of an enquiry into IR35 rather than cover for the tax liability.

We also see some instances of the insurer taking one look at the evidence available to resist an IR35 status enquiry and offering the insured a pay out rather than actually defend the claim.

be careful.

That's why I (personally) don't buy TLC35 - it's too good to be true

(if they're so confident they can defend your claim that they will cover all costs of losing (think they're about 1500 wins & 0 losses on TLC cases?) then you might as well buy a cheaper product)

[piebaps]

Check out the TLC35 exclusions @ 2

"General exclusions
It is hereby agreed and understood that this policy will not cover any claim:

2. where any circumstances are known at the inception of this Policy or the time a
Policyholder was declared for inclusion under this Policy about which the Policyholder knew or
ought reasonably to have known was likely to give rise to a claim under this policy."

[northernladuk]

Check out the TLC35 exclusions @ 2

"General exclusions
It is hereby agreed and understood that this policy will not cover any claim:

2. where any circumstances are known at the inception of this Policy or the time a
Policyholder was declared for inclusion under this Policy about which the Policyholder knew or
ought reasonably to have known was likely to give rise to a claim under this policy."

I guess this would cover finding out that a client won't honour the RoS clause in the contract. Once you raise it with a client and they say not a chance does that mean the cover in invalidated?

[malvolio]

Abbey Tax are offering this now through general accountants, so you don't have to join an organisation to get it.

They always did. It just depends if you want a discount or not.

[Qdos Contractor]

I guess this would cover finding out that a client won't honour the RoS clause in the contract. Once you raise it with a client and they say not a chance does that mean the cover in invalidated?

This is pretty standard insurance wording and it's more in relation to factors that could give rise to HMRC compliance activity, i.e. a known error in a return.

You're unlikely to have clients arguing against substitution until you're deep into an investigation. Given most enquiries hinge on client evidence (which is sometimes unreliable and difficult to obtain), this is essentially the type of risk the insurance is designed to cover.

Outside of HMRC enquiries, if you became aware that substitution was an outright no then naturally it may impact the policy.

[oilboil]

Tax liability insurance in my humble view is like insuring your third arm against breakage.

You can never legally claim against it. All these policies have clauses in them that say if you willfully under-declared tax due or incorrectly classified yourself as outside IR35 then they don't pay - so what exactly are they insuring you for?

Ask yourself why is the cost to cover up to a £20K tax liability around £300 - it's because they really do not expect to ever have to hand over any cash