Reply to: Tax liability insurance

[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

[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.

[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.

[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?

[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."

[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)

[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]

Because if you know you'd lose you know you're doing it dodgily.
The OP seems to be wanting insurance to cover the certain losses of an investigation.

IMO that is fraud/evasion/GAAR.

IMO that is exactly what TLC35 is covering - why else get TLC35 rather than just tax enquiry insurance?

TLC35 is a comprehensive IR35 insurance policy designed with the threat of IR35 in mind. This tax liability insurance policy will protect you in the event of HMRC opening an enquiry into your accounts, whether it is a PAYE compliance review, VAT dispute, IR35 enquiry or a broad range of other HMRC enquiry, Qdos will be there from day one to defend you.

In addition to this invaluable support, the policy will also cover any tax/NIC liabilities, interest and penalties should you be found ‘caught’ by the IR35 legislation up to the indemnity on your policy schedule.

[Lance]

Why on Earth would you do that? Pay (eg) £20,000 extra tax instead of a £500 insurance policy that will cover it? Are you insane?

Because if you know you'd lose you know you're doing it dodgily.
The OP seems to be wanting insurance to cover the certain losses of an investigation.

IMO that is fraud/evasion/GAAR.

The insurance is there to cover the risk of losing a tribunal, not the risk of an investigation (there are cheaper ways to cover that).

[JohntheBike]

Anyone taking tax liability insurance (to cover for HMRC enquiries etc)
I always make sure all my taxes are OK and my contract reviewed and outside IR35, but as you know no guarantees...
I used to take a reasonable cover like for 50K, but was advised to increase the cover substantially by my insurer and that would cost double... just wondered if others are taking such insurance? And up to how much of your yearly income do you cover? i.e. 100% or less?

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

[pr1]

Why would you cover all your turnover? Your tax liability will be smaller than turnover.

You may want to cover you tax liability completely, but IMO if you do that you have accepted that you'd lose if investigated so you could consider paying your tax in full instead of risking it an insuring against it.

Why on Earth would you do that? Pay (eg) £20,000 extra tax instead of a £500 insurance policy that will cover it? Are you insane?

[SandyD]

Why would you cover all your turnover? Your tax liability will be smaller than turnover.

You may want to cover you tax liability completely, but IMO if you do that you have accepted that you'd lose if investigated so you could consider paying your tax in full instead of risking it an insuring against it.

I chose to cover a bit more than my tax liability alone (in case one is charged interest) but not completely cover my turnover... so middle ground...

I found other places doing it cheaper, but they cover for 4 years only instead of 6 years...

[Lance]

Yes, but wondered if others get a cover to cover all their turn over or proportion of it?

Why would you cover all your turnover? Your tax liability will be smaller than turnover.

You may want to cover you tax liability completely, but IMO if you do that you have accepted that you'd lose if investigated so you could consider paying your tax in full instead of risking it an insuring against it.

[Scruff]

Anyone taking tax liability insurance (to cover for HMRC enquiries etc)
I always make sure all my taxes are OK and my contract reviewed and outside IR35, but as you know no guarantees...
I used to take a reasonable cover like for 50K, but was advised to increase the cover substantially by my insurer and that would cost double... just wondered if others are taking such insurance? And up to how much of your yearly income do you cover? i.e. 100% or less?

Sandy

I have IPSE+ Cover, as well as TLC35 from QDOS (at a level that I can live with - it is not as expensive as losing the billable days, in the event of taking time out!).

[SandyD]

You see the problem here don't you?

Yes, but wondered if others get a cover to cover all their turn over or proportion of it?
I was getting a cover for 50% of my annual turn over, but not sure if this is sufficient.