QDOS - TLC35 liability cover endorsement - makes cover worthless.

[aligning2020]

Does everybody who has this insurance have the below endorsement on it? The way that I’m reading it is that it makes purchasing the liability cover section of the insurance worthless. I’d have thought that 99% of successful ir35 cases that hmrc win will include them finding failures in one or more of the working practices mentioned. Following the recent nationwide case QDOS will be protected from paying out on the inevitable increase in similar cases moving forwards. Smart piece of business. Thoughts? And no, these specific details haven’t been discussed on here before.

“Following a claim under ‘Section 6. IR35 Enquiries’, the insurer shall indemnify the policyholder under the terms of ‘Section 8. IR35 Enquiry Taxes and Interest’ and ‘Section 9. IR35 Enquiry Penalties’ provided that during the period under enquiry the following statements of working practices can be agreed:

• The policyholder is able to exercise a Right of Substitution.
• The policyholder has autonomy over their method of work and is not subject to the same level of supervision or control as their clients’ employees.
• The policyholder is not aware of any discrepancies between their contract with an agency and the agency’s contract with the end client.
• The policyholder has not been employed directly by any of their clients in the 12 months prior to commencing work under a contract for services.

If the policyholder is unable to agree the above statements in respect of work carried out during the period under enquiry, no cover under ‘Section 8. Status Enquiry Taxes and Interest’ and ‘Section 9. Status Enquiry Penalties’ shall be provided unless otherwise agreed in writing.

All other terms and conditions remain unchanged.

For the avoidance of doubt, the policyholder is not required to provide a list of clients for whom, and/or contracts for services under which, work has been carried and for which cover is required under the above policy.”

[Pring]

They ask you to agree to those when taking out the policy. IANAL but I read that endorsement as you agreeing when signing up, not whether HMRC agrees. It does give me pause for thought though...

[CodeDonkey]

Does everybody who has this insurance have the below endorsement on it? The way that I’m reading it is that it makes purchasing the liability cover section of the insurance worthless. I’d have thought that 99% of successful ir35 cases that hmrc win will include them finding failures in one or more of the working practices mentioned. Following the recent nationwide case QDOS will be protected from paying out on the inevitable increase in similar cases moving forwards. Smart piece of business. Thoughts? And no, these specific details haven’t been discussed on here before.

“Following a claim under ‘Section 6. IR35 Enquiries’, the insurer shall indemnify the policyholder under the terms of ‘Section 8. IR35 Enquiry Taxes and Interest’ and ‘Section 9. IR35 Enquiry Penalties’ provided that during the period under enquiry the following statements of working practices can be agreed:

• The policyholder is able to exercise a Right of Substitution.
• The policyholder has autonomy over their method of work and is not subject to the same level of supervision or control as their clients’ employees.
• The policyholder is not aware of any discrepancies between their contract with an agency and the agency’s contract with the end client.
• The policyholder has not been employed directly by any of their clients in the 12 months prior to commencing work under a contract for services.

If the policyholder is unable to agree the above statements in respect of work carried out during the period under enquiry, no cover under ‘Section 8. Status Enquiry Taxes and Interest’ and ‘Section 9. Status Enquiry Penalties’ shall be provided unless otherwise agreed in writing.

All other terms and conditions remain unchanged.

For the avoidance of doubt, the policyholder is not required to provide a list of clients for whom, and/or contracts for services under which, work has been carried and for which cover is required under the above policy.”

Yes, I have the exact same terms in my insurance policy.

And I can also confirm your scepticism here, as I've had this confirmed by Qdos recently after finding myself in the unfortunate position of the client stating they've never had any agreement with the agency about the possibility of substitution despite this being clearly stated in the agency's contract.

According to Qdos the fact that you've signed the contract (assessed as an IR35 "PASS" by Qdos themselves) in good faith is irrelevant. According to their own interpretation of these terms, It is solely based on what the client will tell you they'll actually agree to. And if the client doesn't, then 8 and 9 is indeed invalid according to what they've told me.

I should also add that Qdos's user account has posted quite misleading comments on these forums in the past about the substitution clause in particular, claiming the opposite, that it is just "to the best of your knowledge". But when you do get on the phone to them you'll hear a different story.

So yes, the tax liability cover does look kind of worthless - unless you've always been direct or have received written confirmation from all your past clients stating all of the above to be factually true.

TBH despite being bitter about it, I'm still undecided if it makes the insurance overall completely worthless, as they would still be obliged to give you some basic legal assistance in the case of an enquiry. It surely can't be fun to deal with an enquiry letter without even knowing who to call for help to represent you? I would imagine the legal fees for someone else to even read through your case could end up costing more than your yearly insurance.

But there are quite a lot of reservations made in the "Claims conditions" section as well, about the need for a "51% or greater chance of defending a claim", etc. So plenty of opportunity for them to pull out if they don't even need to indemnify you for the tax liabilities. They could just drop the case as quickly as they can if it's all at their discretion. But I can only speculate about what Qdos would actually do here.

It would be interesting to hear of anyone's experience actually making a claim on TLC35 during an enquiry. So far, I've only found Qdos's own comments to hypothetical questions on these forums, but not much in terms of testimonies from affected contractors about how it's worked out for them in practice - for better or worse. But I appreciate most people who have gone through such a thing just want to put such a stressful chapter in their life behind them...

[malvolio]

You won't get testimonies if nobody has ever claimed against the policy...

Given the win/loss ratio in IR35 cases, basic cover for tax investigation costs, either as an IR35 policy, a wider tax cover or IPSE Plus membership should be more than enough protection for most.

But I've been saying that for years; there are many who prefer the additional security they get from having the TLC35-type cover.

[aligning2020]

I believe the QDOS user account monitors and posts in these forums. Can we have a definitive answer from them on my questions above, for the benefit of all please?

[malvolio]

I believe the QDOS user account monitors and posts in these forums. Can we have a definitive answer from them on my questions above, for the benefit of all please?

To be fair, they are unlikely to say anything that implies their product isn't worth having...

If you consider that a fairly small fee is covering a risk of a few tens of thousands, they are entitled to be fairly sure that any case is winnable, and that includes you taking good care to ensure that your position is supportable. Or to put it another way, you are asking them to insure you against falsely if unknowingly declaring yourself outside IR35.

How that all works from now with the client determining the status is a whole other question, of course. For one thing, everyone will be pretty certain that an outside IR35 contract is exactly that.

[CosmicWave]

Regardless of how the claims will be dealt with etc., this is exactly why I, at least a part of me, likes the new changes to the IR35 regime.

At least, from now on, going forward, if the client really means and wants to hire a consultant on an Outside IR35 basis, they will ensure they put in place the correct working practices + contract paperwork (at least to protect themselves), rather than we having to educate them all the time on this, and hence the consulting world will be a proper consulting world as it should be, rather than just bum on seats and helping the employers save ££££s in Employer NIs ++.

At least, going forward, the proper contractors would not have to deal with the agencies rubbish agents with their usual "we have tons of people on here with no issues with IR 35 paperwork" chats, and the on-site WPs will reflect a real Outside arrangement.

Cool stuff.

[aligning2020]

To be fair, they are unlikely to say anything that implies their product isn't worth having...

Quite possibly not. So we can assume that QDOS silence to my original questions in this thread would be implying that. It is the weekend though so will see what Monday does or doesn’t bring.

[NeedTheSunshine]

Regardless of how the claims will be dealt with etc., this is exactly why I, at least a part of me, likes the new changes to the IR35 regime.

At least, from now on, going forward, if the client really means and wants to hire a consultant on an Outside IR35 basis, they will ensure they put in place the correct working practices + contract paperwork (at least to protect themselves), rather than we having to educate them all the time on this, and hence the consulting world will be a proper consulting world as it should be, rather than just bum on seats and helping the employers save ££££s in Employer NIs ++.

At least, going forward, the proper contractors would not have to deal with the agencies rubbish agents with their usual "we have tons of people on here with no issues with IR 35 paperwork" chats, and the on-site WPs will reflect a real Outside arrangement.

Cool stuff.

So what's a proper contractor then? What makes you so special that HMRC won't pick you out. As far as they are concerned all contractors are tax and NI avoiding scum.

[northernladuk]

So what's a proper contractor then? What makes you so special that HMRC won't pick you out. As far as they are concerned all contractors are tax and NI avoiding scum.

There are those that do the diligence, awarw of what and how they do it and are unlikely to lose a case.
And there are those that haven't a clue Look at some of the posts in the last few weeks for examples.

But in that context I think he means consultants delivering ton Sows and not just bums on seats.