Reply to: Survive35 IR35 insurance (from Abbey Tax)

[Chris at CrunchAccounting]

One word of warning

Just be careful that your accountant is not promoting the IR35 insurance, as this increases the risk of being an MSC. This is because it is one of the five activities that shows they (your accountant) are an MSC provider:

"Fifth activity - that of giving or promoting an undertaking to make good any tax loss. Prior to April 2007, the typical MSC scheme offered the client an “IR35 proof” model. Sometimes that came with insurance, with the guarantee that if HMRC successfully challenged the IR35 proof status of the company, there would be no financial consequence for company or worker.

Where subsequent to April 2007, a MSC Provider or an associate either offers insurance against the tax/NIC liabilities arising under the MSC legislation, IR35, or indeed any other provision of the Tax Acts or National Insurance legislation, they will be involved with those client service companies to which they either offer, or promote, such insurance."

[Zero Liability]

I've opted for Qdos's fee protection insurance and IPSE+ membership as a backup, but if I were to go for a policy that covered taxes etc, I'd go for Qdos's, as I think their pricing structure is better.

[BolshieBastard]

Not all the time even when they have to foot the bill.

Unfortunately for them there is an ombudsman service and the courts who can make them pay out, so in "cheaper" cases it's less expensive for them to payout in full.

What's "cheaper" depends on the type of insurance and therefore the risk of having to pay out....

Before you can use the ombudsman, you have to exhaust the insurer's complaint's procedure. And as for the Courts, yes, that's a cheap way to get your money back when you've been fleeced by hmrc.

But good luck if you put your faith in the system though.

[mudskipper]

As a new contractor the QDOS insurance gives me piece of mind at a time where I'm unsure of everything IR35 related. By the time my renew comes up I will probably be far more confident with how it all works and less inclined to take out the insurance.

That sounds a bit arse about to me - you're unlikely to get investigated in your first year of operation, and if you are, and lose, the cost is relatively contained. When you've been at a client for a couple of years, that's when you could end up with a huge tax bill

[Bozwell]

As a new contractor the QDOS insurance gives me piece of mind at a time where I'm unsure of everything IR35 related. By the time my renew comes up I will probably be far more confident with how it all works and less inclined to take out the insurance.

[WordIsBond]

All insurance is based on your approach to risk
there is a higher chance of your house catching fire or getting burgled so you buy home insurance insurance as a given

This. We've all seen a house that has burned down, we've seen houses on fire on the telly, most of us have actually seen a burning house live sometime or other. But how many know someone who has lost an IR35 case?

But also, it's not just how great the risk is, it is what is at risk. We value our stuff in our home a lot, it is personal to us. When someone's house burns down, they feel like their life is destroyed. If HMRC uses IR35 to take a chunk of money from our company, it doesn't have the same emotional impact. Financially it might be the same, but people are more likely to furnish their personal belongings than their money. It just feels like that stuff SHOULD be protected.

[Support Monkey]

All insurance is based on your approach to risk
there is a higher chance of your house catching fire or getting burgled so you buy home insurance insurance as a given

I am forever getting calls about insurance to cover my water pipes getting damaged or having issues, I know where the pipes are because I put them in so I don't see a risk so I don't have insurance for them

People don't see IR35 as a risk so don't see it being important enough to insure against, like others have said its going to take a big case and someone getting hammered with a big tax bill to change peoples perception of IR35

[TheFaQQer]

Not one of the contractors I work with has IR35 insurance.

Nor here. And only one other is an IPSE member.

Each to their own, I guess - if you don't think you need the product then there's no point in paying for it. Same with household contents insurance or an accountant.

[Maslins]

And a serous increase in the premium...

Quite possibly...double win for them!

Still, whilst of course long term insurers always win(!), I think people should be fairly relaxed that TLC35 would pay out if situation arose. Trying to wrangle their way out of it based on small print would destroy their reputation IMO.

[malvolio]

FWIW this is what the guy from QDOS said to me a few years ago, and I believed him.

Uptake of the insurance currently isn't that high relative to how many contractors there are. If there was a high profile IR35 case where the taxpayer lost, and QDOS had to pay out quite a chunk to cover the additional taxes under TLC35, you can imagine it would lead to a flood of new customers for them.

And a serous increase in the premium...

[Maslins]

It's been said a few times that it would be good for them if they did have to pay out, as the "They've never paid out" statement would no longer be true

FWIW this is what the guy from QDOS said to me a few years ago, and I believed him.

Uptake of the insurance currently isn't that high relative to how many contractors there are. If there was a high profile IR35 case where the taxpayer lost, and QDOS had to pay out quite a chunk to cover the additional taxes under TLC35, you can imagine it would lead to a flood of new customers for them.

[mudskipper]

Not one of the contractors I work with has IR35 insurance.

Each to their own.

[PerfectStorm]

Not one of the contractors I work with has IR35 insurance.

[mudskipper]

Probably because the number of IR35 investigations has been historically low, the insurance take up from contractors is also historically low ie head in sand about IR35 and, HMRC's success rate with IR35 is historically low.

Im a cynic where this insurance is concerned (and yes, I still have it myself when Im active) because we all know, insurance companies will try anything to get out of paying up any claim.

It's been said a few times that it would be good for them if they did have to pay out, as the "They've never paid out" statement would no longer be true

[SueEllen]

Probably because the number of IR35 investigations has been historically low, the insurance take up from contractors is also historically low ie head in sand about IR35 and, HMRC's success rate with IR35 is historically low.

Im a cynic where this insurance is concerned (and yes, I still have it myself when Im active) because we all know, insurance companies will try anything to get out of paying up any claim.

Not all the time even when they have to foot the bill.

Unfortunately for them there is an ombudsman service and the courts who can make them pay out, so in "cheaper" cases it's less expensive for them to payout in full.

What's "cheaper" depends on the type of insurance and therefore the risk of having to pay out....