Reply to: IR35 Insurance - have Qdos ever paid out?

[Qdos Contractor]

Sorry for the delayed response - not sure how I missed this.

I can understand why you would eye an insurance provider with a certain amount of suspicion. I also agree that the incumbent policy wording is perhaps a little ambiguous in places (as stated, it covers all of our tax insurances) and I can confirm that we are in the process of revising them all - they'll obviously be made public as soon as they're complete.

But...

We aren't a typical insurance provider - the policies we offer have been built on the back of our experience and expertise. We have dealt with over 1,300 status enquiries and in all my years at the company I can't think of one occasion where we've even thought about pulling out of defending one. We employ ex-inspectors who happily take on any status case that comes our way and they would be aghast if someone accused them of attempting to wriggle out of dealing with it.

The TLC35 policy is a fairly unique product and the nature of IR35 means it's quite difficult to definitively confirm someone's working practices. However, we ask contractors to give us their reasonable opinion on their circumstances. The only reason we'd pull out of a case is if there was a blatant misrepresentation on the application - for instance if you were previously an employee of your client but ticked that you weren't.

If we ever acted unreasonably in a tax case I would fully expect the contractor involved to kick up a right stink on forums like this. I don't think you'll be able to find any previous occurrences and we've been doing this for a long, long time.

I'm more than happy to answer any specific queries on the policy, either in this thread or by email/PM.

[rootsnall]

The benefits of insurance?

Arguably none. After all they have never needed to pay out, always win thus there is no benefit.

Arguably lots. When an enquiry is started they are very rarely concluded by you simply writing back to the status inspector saying "sorry, guv, but you're wrong". A full tax investigation (be it for IR35 or anything else) becomes a very time consuming process. If you handle it yourself you will likely lose - because they often centre on highly technical arguments. If you take proper advice it can get very expensive very quickly. I personally spent in the order of 10k fees over a 3 year period. If I also factor in the lost billable time due to mettings with HMIT, advisors and correspondence the actual cost to me was effectively about 30k.

Only an individual decide if it is worthwhile to them. If you have average luck then over time you will pay more. However your view may well change after you have had an enquiry started.

I think the original post was talking about is it worth insuring for the actual payout ( NI + penalties ) if you lose, rather than insuring for the costs of any investigation. I think most contractors are insured for the cost of getting expert advice ( via PCG or otherwise ) but few are covered for the actual payout. PCG+ is the only insurance I have ever bothered with. My strategy has always been to limit how long you are at any one client and then if you do come a cropper you can afford to take the hit if you lose case. ie. don't be like the guy at the AA with the 99K bill

[cruiser]

Assuming IR35 insurance is taken out on a year-by-year basis.

Does IR35 insurance cover all future HMRC investigations started for work done in that period, or only cover investigations started in that period - even for work done years ago.
.

Yes it is and it covers all previous contracts with a single company. With regard to the legislation, the qualifiers to purchase the insurance from Qdos are insufficient to guarantee actual representation... i.e. they are very happy to take your money. Whether they will actually represent you is another matter, as per the clause: you'll be represented only if: [quote]

"The policyholder has a reasonable prospect of either pursuing or defending a claim"

So they don;t even need to keep up with current legislation.

They will review your working practices and say things like "you have a very good chance" but the reality is you won't know if they'll actually represent you until you get a tax investigation and they review your case properly.

A bit like when you have a crash and the investigator comes out and check for undisclosed modifications on your car, etc. Except in this case it's easy to know you're covered unless you lie - unlike TLC35 which is very grey... not unlike the legilation itself.

Soooo... you need to be totally sure you're outside; but it's still up to Qdos what is a "reasonable" prospect of success, as it's not defined on any policy for you.

[ASB]

The benefits of insurance?

Arguably none. After all they have never needed to pay out, always win thus there is no benefit.

Arguably lots. When an enquiry is started they are very rarely concluded by you simply writing back to the status inspector saying "sorry, guv, but you're wrong". A full tax investigation (be it for IR35 or anything else) becomes a very time consuming process. If you handle it yourself you will likely lose - because they often centre on highly technical arguments. If you take proper advice it can get very expensive very quickly. I personally spent in the order of 10k fees over a 3 year period. If I also factor in the lost billable time due to mettings with HMIT, advisors and correspondence the actual cost to me was effectively about 30k.

Only an individual decide if it is worthwhile to them. If you have average luck then over time you will pay more. However your view may well change after you have had an enquiry started.

[maxima]

Unlike everyone else, HMRC are not going away and still believe freelances to be tax avoiders first and a valuable, necessary commercial resource second

my thinking exactly.

[centurian]

As you can see - these clauses could logically protect the insurer from any payout... e.g. if there were a big crackdown on IR35 and the governemt started taking a much harder stance.

Assuming IR35 insurance is taken out on a year-by-year basis.

Does IR35 insurance cover all future HMRC investigations started for work done in that period, or only cover investigations started in that period - even for work done years ago.

If it's the latter (I would guess it probably is), then if HMRC really start clamping down hard and win a stack of cases, surely the underwriters can simply withdraw from offering cover in future years.

That's perfectly legal (as long as they meet current obligations), but it means all those who have been relying on the insurance as a stop-guard, suddenly find themselves unable to get any cover just at the moment when they really need it.

[cruiser]

TLC35 Policy

If you're wondering if Qdos would ever pay out - it's worth actually reading the policy document you get for the insurance. The policy is "paperless" which means it's up to you to download the policy as a pdf.

Now I work in insurance - and it's the insurer's bread and butter to NOT pay out - and claims investigators are employed to do exactly this. Of course this isn't the image an insurer portrays... but their entire business is about minimising payouts.

In terms of any policy you need to read EVERY clause. Insurers are bound by regulatory authorities, however if the policy says you're not covered on Tuesday afternoons if you're wearing aftershave... you won't be.

Qdos have a "generic" policy document that covers all their products. This makes it very difficult to specifiy the clauses that would apply to your particular product, e.g. TLC35, etc, perhaps deliberately so. I asked several times for a specific policy document, but nothing was forthcoming.

There are also several clauses that seem ambiguous and should be noted: these are from the policy itself:

"Where the policyholder rejects an offer of settlement, which the insurer deems to be reasonable, the insurer reserves the right to remove or restrict any further payment of professional fee."

“Reasonable” is deemed by the *insurer*, so how much are you really protected?

Payments only made if: (quote)


a) The policyholder has a reasonable prospect of either pursuing or defending a claim.

c) The benefits likely to be obtained by proceeding with the claim justify the likely costs.

d) The appointed consultant considers it reasonable in all circumstances that the claim should proceed.

As you can see - these clauses could logically protect the insurer from any payout... e.g. if there were a big crackdown on IR35 and the governemt started taking a much harder stance.

Needless to say - my requests to get the wording linked to my specific working practices were always blanked.

You can decide.....

[malvolio]

Thanks for sharing that, interesting to know. Out of interest how come you know so much about these cases? Is the information published anywhere?

I belong to a (not very secret) society that takes a close interest in such things. Cunning, isn't it...

[Qdos Contractor]

How do you decide whether a certain contract will be defended for TLC ?
When is this decision made ?

We are confident that positive actual working practices give us enough ammunition to argue a contractor's case in the event of an enquiry. Clearly it is highly beneficial to have a compliant contract in the first place, but the way the services are performed in reality is crucial. If you had a good contract but the actual working practices were poor, HMRC would be quick to expel the contract as a sham. Paradoxically, if your contract isn't so good but your working practices are akin to self-employment, we would be happy to fight the case.

Clients who have purchased TLC35 are automatically given free Freelance Club membership, so we advise that any contracts are sent in for an assessment anyway. However, as I mentioned before, the result will not impact the policy in any way.

[Lewis]

Fair comment, and bears out my earlier assertions.

It's also worth noting that a case was lost last week - not by QDOS, but by one of the other major experts - directly as a result of the client's evidence at the hearing, which flatly contradicted the content of a Confirmation of Arrangements letter he had signed four years earlier. So like they say, there are no certainties.

Thanks for sharing that, interesting to know. Out of interest how come you know so much about these cases? Is the information published anywhere?

[2uk]

Due to the fact that Qdos Consulting are one of the leading experts in the field of IR35 and status and have a track record of successfully defending contractors in IR35 enquiries that is second to none, there has never been the necessity for a TLC policy to pay out. Whilst this provides contractors with the confidence that they are receiving the best representation, each IR35 enquiry can present its own unique problems, e.g. attitude of a Status Inspector, unsupportive end client to name a few. This will have an impact on the prospects of success and cast doubts over the potential outcome. Having TLC in place, however, affords the contractor the peace of mind that, in the unlikely event that the enquiry is lost, the insurance policy will react to meet any arising tax liabilities.

From the start of any IR35 enquiry there can never be absolute certainty that the contractor will be victorious, even though they may have a solid contract and the working practices appear to indicate self employment. It is only through the progressive probing of HMRC that other facts may come out and other external influences may create an uncertain outcome.

The risk assessment for TLC35 is based on a simple working practices risk assessment, which can be completed online. We do not need sight of any written contracts and the IR35 status of these have no bearing on the policy.

How do you decide whether a certain contract will be defended for TLC ?
When is this decision made ?

[malvolio]

Fair comment, and bears out my earlier assertions.

It's also worth noting that a case was lost last week - not by QDOS, but by one of the other major experts - directly as a result of the client's evidence at the hearing, which flatly contradicted the content of a Confirmation of Arrangements letter he had signed four years earlier. So like they say, there are no certainties.

[Qdos Contractor]

Due to the fact that Qdos Consulting are one of the leading experts in the field of IR35 and status and have a track record of successfully defending contractors in IR35 enquiries that is second to none, there has never been the necessity for a TLC policy to pay out. Whilst this provides contractors with the confidence that they are receiving the best representation, each IR35 enquiry can present its own unique problems, e.g. attitude of a Status Inspector, unsupportive end client to name a few. This will have an impact on the prospects of success and cast doubts over the potential outcome. Having TLC in place, however, affords the contractor the peace of mind that, in the unlikely event that the enquiry is lost, the insurance policy will react to meet any arising tax liabilities.

From the start of any IR35 enquiry there can never be absolute certainty that the contractor will be victorious, even though they may have a solid contract and the working practices appear to indicate self employment. It is only through the progressive probing of HMRC that other facts may come out and other external influences may create an uncertain outcome.

The risk assessment for TLC35 is based on a simple working practices risk assessment, which can be completed online. We do not need sight of any written contracts and the IR35 status of these have no bearing on the policy.

[Lewis]

IIRC, Qdos have fought a number of cases and never lost.

So I'd be astounded if they've ever paid out, as there is no need.

When I asked a while back they said they had lost one (out of many hundreds)

[TheFaQQer]

If Qdos only agree to cover you with their IR35 Insurance once they have reviewed your contract and are happy it is a not caught by IR35, this would suggest they never or very rarely pay out ...which brings me to my question ....what's the point of taking out their insurance?

If you have PCG membership this will ensure you can get the best representation should you get investigated by the Revenue, and if Qdos deem you to be a clear pass for IR35 then the chances are you will almost certainly win any case against the Revenue anyway.

Does anyone know an example of them actually paying out? They obviously don't cover any contracts that they think may fail.

The only way I could see them losing a case is if you mislead them about the actual working relationship between yourself and your client ...which would probably invalidate the insurance anyway

(I may be missing the point here, but it seems like a complete waste of money) Any thoughts?

IIRC, Qdos have fought a number of cases and never lost.

So I'd be astounded if they've ever paid out, as there is no need.