IR35 insurance when closing down a business

**jamesbrown** · 14 March 2021, 15:39

Unless you've been negligent (which is near impossible if you had professional reviews and they reflect reality), then I don't see the point in maintaining it beyond the closure period (obviously, the closure must be approved by HMRC so you want insurance in place in the unlikely event that the closure triggers an investigation).

You cannot evade an IR35 liability by closing a company, but the scope for reinstating a closed company or transferring the liability to you personally via PAYE reg 72 is pretty remote, absent negligence or fraud.

As the liability is on YourCo, not you personally, you should also check which entity is being insured, because YourCo will no longer exist. You should also check whether your existing insurance is written on an occurrence basis or claims made basis, but I think it's the latter for Qdos (if the former, you're covered per contract, not per claim).

**philgo** · 14 March 2021, 15:55

Originally posted by jamesbrown View Post

Unless you've been negligent (which is near impossible if you had professional reviews and they reflect reality), then I don't see the point in maintaining it beyond the closure period (obviously, the closure must be approved by HMRC so you want insurance in place in the unlikely event that the closure triggers an investigation).

You cannot evade an IR35 liability by closing a company, but the scope for reinstating a closed company or transferring the liability to you personally via PAYE reg 72 is pretty remote, absent negligence or fraud.

As the liability is on YourCo, not you personally, you should also check which entity is being insured, because YourCo will no longer exist. You should also check whether your existing insurance is written on an occurrence basis or claims made basis, but I think it's the latter for Qdos (if the former, you're covered per contract, not per claim).

Thanks - So I guess I should have the insurance in place at least for 1 year with the maximum coverage (liabilities + representation cost) while I am closing it down.

**jamesbrown** · 14 March 2021, 16:00

Originally posted by philgo View Post

Thanks - So I guess I should have the insurance in place at least for 1 year with the maximum coverage (liabilities + representation cost) while I am closing it down.

Right. Beyond that (i.e., beyond the point of closure), I wouldn't bother, simply because the bar to reinstating a company and transferring the liability to you, personally, is so high; I would argue impossible when you've been diligent enough to have professional contract reviews.

**philgo** · 14 March 2021, 16:35

Originally posted by jamesbrown View Post

Right. Beyond that (i.e., beyond the point of closure), I wouldn't bother, simply because the bar to reinstating a company and transferring the liability to you, personally, is so high; I would argue impossible when you've been diligent enough to have professional contract reviews.

Yes that's my thinking as well - Any feedback on QDOS insurance TLC IR35?

**jamesbrown** · 14 March 2021, 17:25

Originally posted by philgo View Post

Yes that's my thinking as well - Any feedback on QDOS insurance TLC IR35?

Not particularly. I've personally always found IR35 tax loss insurance to be a waste of money given the extremely low probability of your being found inside when you have professional reviews that say otherwise (assuming they consider your working practices and assuming you keep on top of those working practices). The insurance you want (imho) is to cover professional fees, rather than tax loss, because professional fees are a guaranteed cost of an investigation whereas tax loss is almost guaranteed not.

**philgo** · 14 March 2021, 22:25

Originally posted by jamesbrown View Post

Not particularly. I've personally always found IR35 tax loss insurance to be a waste of money given the extremely low probability of your being found inside when you have professional reviews that say otherwise (assuming they consider your working practices and assuming you keep on top of those working practices). The insurance you want (imho) is to cover professional fees, rather than tax loss, because professional fees are a guaranteed cost of an investigation whereas tax loss is almost guaranteed not.

I see your point and you might be right. However can you detail a bit more why you think tax loss is almost for sure not a guaranteed cost?

**jamesbrown** · 14 March 2021, 22:59

Originally posted by philgo View Post

I see your point and you might be right. However can you detail a bit more why you think tax loss is almost for sure not a guaranteed cost?

I just mean, statistically speaking, how many cases have HMRC won? They have a pitiful record, and many of the cases they lost were borderline. If you've had your contract and working practices reviewed and found to be outside, it is unlikely that an HMRC investigation will successfully find otherwise. As I say, the professional fees are a real and unavoidable cost, but how many cases have actually been lost and had taxes and penalties applied? Indeed, why is tax loss cover so cheap? I don't believe any of these insurers has ever paid out and I'm sure they'd love to be able to say they had - great advertising. IMHO, it's a complete waste of money, whereas cover for professional fees is very sensible, even if the risk of investigation is small.

**jamesbrown** · 14 March 2021, 23:03

Another thing to bear in mind is that tax loss insurance will only cover you if there is a "reasonable prospect of success" - read the small print on TLC 35. It isn't intended to be a gotcha but, if there's a realistic prospect of success, you're really quite unlikely to lose

**philgo** · 15 March 2021, 12:07

yes indeed, I believe you are right...it seems that QDOS offer is to good to be true...you pay £199 and they cover £25,000 liability...

IR35 insurance when closing down a business