Legality of tax insurance

**centurian** · 25 August 2011, 06:28

Can he point you to the relevant legislation - or legal precedent, which states it is illegal - that should clear it up.

My experience has shown that many quoted "illegal" acts are simply industry best practice guidelines.

**SueEllen** · 25 August 2011, 07:40

Originally posted by MikeToml View Post

I have QDOS TLC35 insurance which, I believe, covers me for any taxes and penalties imposed by HMRC. I have a friend who is fairly experienced in the insurance world (he isn't some guy on the phones for Hastings Direct) who insists it is illegal to offer insurance which pays out for taxes and/or penalties owed.

Ask your friend for the case law, the Act or regulations/guidelines from the appropriate regulator that makes this "illegal". If he can't come up with anything then you know how much is "insistence" is worth........

**LisaContractorUmbrella** · 25 August 2011, 08:46

Allen & Overy | Areas of Expertise | Insurance: fines and penalties

HTH

**SneakySimon** · 25 August 2011, 08:54

TLC35

I have that insurance and without the documents, I am pretty sure that it covers the following:

Legal cover for any investigations
If your found to be caught by IR35, then QDOS pay your fine

If you get investigated and have fines / back tax, you have to pay that - they just pay the legal cost.

All above is from memory - recomend you check your documentation.

**Qdos Contractor** · 25 August 2011, 12:29

Originally posted by SneakySimon View Post

If your found to be caught by IR35, then QDOS pay your fine

If you get investigated and have fines / back tax, you have to pay that - they just pay the legal cost.

Actually, the policy does cover the back tax. It covers all tax, NI, interest and penalties in respect of IR35 enquriries - i.e. everything (up to the indemnity limit, of course).

The policy is not insuring any kind of criminal fine or penalty. As you will see in Lisa's link, whilst criminal fines/penalties are uninsurable, civil fines or penalties are generally viewed as insurable provided they have not arisen as a result of fraud, dishonesty or a deliberate act.

Our policy specifically excludes any claim which arises as a result of fraud or dishonesty, and contains a further exclusion in respect of circumstances where public policy would prevent the application of insurance.

The TLC35 insurance was constructed by ex-HMRC inspectors and was reviewed and approved by insurers prior to being released to the market a number of years ago.

**Alan @ BroomeAffinity** · 25 August 2011, 12:57

@Qdos Consulting: Would you not say there is an element of reverse Catch 22 to this policy?: I looked at it for clients last year (I'm an accountant and carry the TaxWise insurance) but it seemed to me that the only people who were able to get the cover were those who had such strong working practices etc., that it made it all but 100% certain they would never need to claim.

**Qdos Contractor** · 25 August 2011, 13:51

Originally posted by Just1morethen View Post

@Qdos Consulting: Would you not say there is an element of reverse Catch 22 to this policy?: I looked at it for clients last year (I'm an accountant and carry the TaxWise insurance) but it seemed to me that the only people who were able to get the cover were those who had such strong working practices etc., that it made it all but 100% certain they would never need to claim.

Not at all. The application questionnaire is not particularly in depth - we are only asking a handful of yes/no questions to try to get an overall feel of where the contractor stands. Sadly IR35 isn't as black and white as that, so the insurance covers the massive grey area. Equally, because many of the questions we ask are hypothetical, we couldn't use the initial application to fall back on and wriggle out of claims.

For instance, let's say the contractor has, to the best of his knowledge, a right of substitution both in the contract and in reality. If HMRC interviewed his end client and they completely went against what the contractor thought, he'd be in all sorts of trouble. This is the sort of situation the policy is designed for.

Any number of things could go wrong in an IR35 enquiry. There have been plenty of cases where the contractor was in a seemingly strong position, only for HMRC to focus on a specific area that causes a lot of damage.

**psychocandy** · 25 August 2011, 16:21

Originally posted by Qdos Consulting View Post

Not at all. The application questionnaire is not particularly in depth - we are only asking a handful of yes/no questions to try to get an overall feel of where the contractor stands. Sadly IR35 isn't as black and white as that, so the insurance covers the massive grey area. Equally, because many of the questions we ask are hypothetical, we couldn't use the initial application to fall back on and wriggle out of claims.

For instance, let's say the contractor has, to the best of his knowledge, a right of substitution both in the contract and in reality. If HMRC interviewed his end client and they completely went against what the contractor thought, he'd be in all sorts of trouble. This is the sort of situation the policy is designed for.

Any number of things could go wrong in an IR35 enquiry. There have been plenty of cases where the contractor was in a seemingly strong position, only for HMRC to focus on a specific area that causes a lot of damage.

I can agree with QDOS. I did the questionnaire they talk about and they were happy to agree to take me on as insured under this policy. Nothing too dodgy in the questions asked to be honest.

**centurian** · 25 August 2011, 18:27

So to answer the OP - seems like your mate is talking out of his backside

Legality of tax insurance