Reply to: "IR35 tax is a huge failure"

[dx4100]

If they lose and if they don't pay out then their business is over - everyone with TLC35 will stop their policies

When all is said and done this is very true... The people you have the insurance more than likely use these boards. I would imagine we would find out very quickly if their is a case of none payout and everyone would very seriously review if they would continue with their premiums.

I have always had the insurance. I answered the questions honestly. That dosent mean I wont get stiffed somewhere along the line. If I do I would expect my insurance company to pay.

If it is true their has only be six losses I would imagine the insurance companies are unlikely to be brought down by a couple of claims.

[Hex]

Insurance is a product which is of best use when insuring against something that is very unlikely to happen, but if it did happen it would cause a lot of hardship.

Nowadays insurance is also available for things that are much more likely to happen. In these cases the insurance premiums are high (relatively) to reflect the likelihood of a claim occuring. This partially negates the value of the insurance as the cost of the premiums can quickly outweigh the benefits a claim may give. This doesn't stop insurance companies selling these policies mind - after all they make quite a lot of money from the high premiums.

IMHO it is only worth taking out insurance for things that are very unlikely to happen but if they did they would cause me a lot of hardship. The premium paid in these cases is a small price to pay for the peace of mind.

I take out IR35 insurance that will pay my taxes, interest and penalties in the unlikely event that I have to pay them. The potential liability for this could be life changing for me and I'd rather have insurance to cover it. I don't take out an extended warranty on my washing machine as I can replace it relatively painlessly myself if it does breakdown, and the money I save by not taking out extended warranties can be used to replace any item if it does breakdown.

It all comes down to your individual attitude to risk and to how life changing you think an unlikely event may be and how much you care. But taking out insurance on things that are unlikely to occur is very valid for a lot of people.

[poppy01]

Sad to say really, but I regard my QDOS policy as an essential cost of doing freelance business in the UK. It's sad because I'm effectively insuring myself against the actions of our own elected government.

'elected' government

[Fred Bloggs]

Sad to say really, but I regard my QDOS policy as an essential cost of doing freelance business in the UK. It's sad because I'm effectively insuring myself against the actions of our own elected government.

[Lewis]

How many times has this type of insurance paid out?
I cannot see how this type of insurance would ever have to pay.

The contractor fills out the insurance questionannaire honestly stating working practice X (e.g. no direct control).
The contractor is investigated and loses on the basis of X.
The insurance company then turns around and says you were not honest about X we won't be paying you.

So you have lost the investigation, you have to pay the tax and fines and you also gave away some extra cash in premiums.

This has been debated so so so many times on other threads. The insurance has never paid to date as QDOS have not lost for a TLC35 client to date. But IR35 is never clear cut, being able to answer a basic questionarie that I reckon the vast majority of contractors can answer ok, in no way means you are safe, as QDOS have said, getting back stabbed by the client seems to be happening a lot now. For less than a days pay I feel much happier having the insurance in place. If they lose and if they don't pay out then their business is over - everyone with TLC35 will stop their policies, QDOS have always been helpful and proactive, I for one have no reason to doubt them. Of course if they lose a lot all in a row maybe they will withdraw the product, who knows?, but until that happens I am keeping the insurance.

[malvolio]

How many times has this type of insurance paid out?
I cannot see how this type of insurance would ever have to pay.

The contractor fills out the insurance questionannaire honestly stating working practice X (e.g. no direct control).
The contractor is investigated and loses on the basis of X.
The insurance company then turns around and says you were not honest about X we won't be paying you.

So you have lost the investigation, you have to pay the tax and fines and you also gave away some extra cash in premiums.

I've made that point several times over the years - you are insuring against a risk that the insurers are almost guaranteeing won't happen. However, the problem is the word "almost"; there are no certainties with HMRC and some think the additional protection necessary. It's a trade off betwen operating profit and comfort. As we have seen in recent cases, the client is just as likely to stitch you up by denying the contractual content and working arrangements as anyone.

[crack_ho]

How many times has this type of insurance paid out?
I cannot see how this type of insurance would ever have to pay.

The contractor fills out the insurance questionannaire honestly stating working practice X (e.g. no direct control).
The contractor is investigated and loses on the basis of X.
The insurance company then turns around and says you were not honest about X we won't be paying you.

So you have lost the investigation, you have to pay the tax and fines and you also gave away some extra cash in premiums.

[Qdos Contractor]

Not sure if you're referring to our TLC policy here, centurian, but I responded to some very similar queries regarding the insurance throughout this thread.

Without going into too much depth again, we risk assess the applications on the basis of working practices, not the contract. Therefore there is no 'contract being a sham' issue. We ask about 20 questions about how the contractor works and runs his/her business.

I can understand the concern about us not paying out - it is an insurance policy after all and lots of us have experienced problems with insurance companies. This is a unique type of policy though and we're not a traditional insurance company. Our underwriters agree to cover this type of risk because of our expertise in the field - if we can't successfully defend a contractor the policy will pay out.

If somebody knowingly makes a serious misrepresentation on an application for insurance they can expect their claim to be turned down. This has never happened with us though and I'd be surprised if it ever did. We've designed the application form carefully to avoid ambiguity.

We are also proactive in improving an insured client's position after they've purchased a policy. Contract reviews are provided without charge and free advice and other documentation provided.

[centurian]

There is no such smallprint. Do you think I havent read it?

Very surprised about that. If I was the underwriter I would be asking why cover is being provided to people where the working practices might not be the same as the contract.

After all, how do you assess the risk. The contract can be assessed, but that risk assessment is worthless if the contract is a sham - and like it or not - for some contractors it is exactly that.

But if they haven't put such a clause in, then they are the mugs. Go for it.

Anyhow my contracts are always reviewed, and I make sure my working practises are always aligned.

Then you probably don't need the insurance in the first place

If you think my insurer wont payout I'd be grateful if you could give an example where this has occurred. Not likely you'll find one though, given HmRC almost never win.

Ditto


I'm not saying the insurance is useless, but at the same time, no insurance is bulletproof. Your OP ("dont care, I'm insured") indicates that you see the insurance as some kind of silver bullet against the IR35 blood suckers, so I'm just urging some care against complacency.

[Fred Bloggs]

Let's just wait and see, shall we. We won't see any changes before the next election anyway, let's not go getting all despondent until we have to.

Agreed, but I'm resigned to paying my QDOS premium for as many years as it takes I'm afraid.

[poppy01]

I wonder how good that insurnace actually is - particularly the part that pays out tax and penalties.

You'll probably find some smallprint that says that if working practices are not aligned with the contract, then the insurance won't pay out - and I can't blame the insurers for that - they can't be expected to pay out if the contract is deemed to be a "sham".

There are two main ways to lose IR35

a) Bad contract (in which case you won't get insurance)
b) Working practices not aligned (in which case the insurance won't pay out)


So unless your insurer really screwed up in reviewing your contract, it's highly unlikely it will pay out if you lose (the tax and penalties part).

There is no such smallprint. Do you think I havent read it?
Anyhow my contracts are always reviewed, and I make sure my working practises are always aligned.

If you think my insurer wont payout I'd be grateful if you could give an example where this has occurred.

Not likely you'll find one though, given HmRC almost never win.

[centurian]

dont care, I'm insured against investigation, legal challenges, tax and penalties If I lose. I am in business same as those f**wits who charge graduates at at 1000 a day (the vested interest ir35 was designed to protect)

I wonder how good that insurnace actually is - particularly the part that pays out tax and penalties.

You'll probably find some smallprint that says that if working practices are not aligned with the contract, then the insurance won't pay out - and I can't blame the insurers for that - they can't be expected to pay out if the contract is deemed to be a "sham".

There are two main ways to lose IR35

a) Bad contract (in which case you won't get insurance)
b) Working practices not aligned (in which case the insurance won't pay out)


So unless your insurer really screwed up in reviewing your contract, it's highly unlikely it will pay out if you lose (the tax and penalties part).

[NotAllThere]

How come the PCG could work out how much tax had been collected, but Dim Prawn (not the CuK Dim Prawn) has repeatedly said it isn't possible?

It will go and no doubt be replaced with something equally as inadequate

Or be replaced by something even more bizarrely inexplicable.

[poppy01]

IMO, IR35 is going nowhere. The last couple of wins for HMRC will boost their confidence and the tax take considerably. The noose is tightening for Ltd Co contractors I'm afraid. And no political party is interested except to raise more tax from a soft target.

dont care, I'm insured against investigation, legal challenges, tax and penalties If I lose. I am in business same as those f**wits who charge graduates at at 1000 a day (the vested interest ir35 was designed to protect)

[malvolio]

IMO, IR35 is going nowhere. The last couple of wins for HMRC will boost their confidence and the tax take considerably. The noose is tightening for Ltd Co contractors I'm afraid. And no political party is interested except to raise more tax from a soft target.

Let's just wait and see, shall we. We won't see any changes before the next election anyway, let's not go getting all despondent until we have to.