Reply to: QDOS IR35 insurance

[Ketto]

I don't believe anyone ever has. That could be because the presence of lawyers scares such cases away. But they've never paid out.

My question was slightly loaded as i have this insurance (and have had it for a few years) and aware QDOS would probably read it, so was hoping the QDOS forum member would jump in with “Yes, we paid out 38 times in the last three years” or similar.

i’ve always been very sceptical about it for the reasons jamesbrown states and have considered not renewing that aspect for the previous couple of years (as everyone says, the real must have is the investigation fees protection, not tax liability protection). Not cancelled it so far as i figure the cost as a % of turnover is so small i may as well have every protection possible if the dreaded brown envelope lands.

How many claims have been made on this product and how many have you paid out in the last five years QDOS? As others are assuming, i’ll assume basically zero unless you let us know otherwise.

[jamesbrown]

I don't believe anyone ever has. That could be because the presence of lawyers scares such cases away. But they've never paid out.

Well, apparently they have, or are just about to - see above. One is the loneliest number . But it isn't zero.

[PerfectStorm]

Have any forum members made a successful claim under the tax loss insurance?

I don't believe anyone ever has. That could be because the presence of lawyers scares such cases away. But they've never paid out.

[ladymuck]

So your client is determining your status, and issuing the SDS, but are requiring you to have insurance in case they're wrong? That implies they think they can pass the liability for their mistake down to you...

[pjt]

I too was mandated to get IR35 insurance against my client in this outside gig. I argued it. Said I'd done the due diligence with QDOS reviewing the contract and didn't feel I needed insurance cover.
Client insisted and I didn't want to lose a really high paying gig on a principle so I sucked it up.
I bet we are at the same client co!!!!

Suspect its more the agent thats putting this clause in by default. But I didn't see the sense fighting it as its not exactly a lot of money and does actual have a purpose.

[ShadyBA]

I too was mandated to get IR35 insurance against my client in this outside gig. I argued it. Said I'd done the due diligence with QDOS reviewing the contract and didn't feel I needed insurance cover.
Client insisted and I didn't want to lose a really high paying gig on a principle so I sucked it up.
I bet we are at the same client co!!!!

[pjt]

My current gig has it as a requirement in the contract. So I've been determined as outside by the client but prior to starting I had to prove I had IR35 insurance. Not sure if this is normal but for the price I just took the insurance.

[jamesbrown]

The “prospects of success” condition (which is naturally commonplace in insurance policies of various types) has certainly been a regular topic of conversation over the years. In our view it is a bit of a red herring; we have never pulled out of covering an IR35/off-payroll case due to a lack of prospects of success. Indeed, with the policy I mentioned above, these “prospects” are automatically deemed to have been met if Qdos carried out the original assessment – which will be the case in every instance.

I would also disagree that a case which had “prospects” on day one of an investigation carries a trivially small risk of liability.

In the early years of the chapter 8 rules we, and other professionals like us, certainly had a very high success rate in defending cases. As time has progressed this has changed, both because of increasingly convoluted case law but also the increase in HMRC’s aggression in pushing cases through the tribunal system. As we’ve seen in recent years, the results of tribunal cases are far from predictable.

Whilst I can’t give details, we have very recently settled a chapter 8 case which had been running for 10+ years and will benefit from the full indemnity limit of the liability portion of our cover.

It isn't a red herring for exactly the reason you cite - the prospects of success are always going to be reasonable when the insured party has been diligent and having a full review of the contract and working practices is obviously diligent. My argument is that diligence, plus cover for legal expenses, is all you need, and that tax loss cover is essentially bloatware, given the marginal risk of tax loss for a diligent contractor with legal expenses cover.

Nevertheless, thank you for the additional information regarding successful claims made under the tax loss policy - I don't believe I have seen any references to this before. In that case, it sounds as though you've had one claim that has paid out under the tax loss policy, but you seem to expect more in future due to the changing risks at tribunal. I think that is helpful for others in determining whether the risk is significant - it is certainly not zero.

[genius]

But here is the problem, everyone thinks they fall outside but a) HMRC just don't think so across the board and b) most people don't know enough about IR35 to be sure. If you do you due diligence getting your contract checked, acting properly and not letting your determination slip then you will be covered by the insurance.

But I'd ask why you think you are as everything is determined by the client via SDS now so what you think doesn't matter. That is unless your client is classed as a small company. So are you doing your own determination or do you have an SDS?

It's not the ruling you need to be worried about, its the cost of the investigation. Ideally you would be right you are outside and HMRC will lose but without insurance that could still be crippling. And as I say, if you due your diligence it will be covered. We don't hear about many cases in the media but many moons ago QDOS gave us a hint at how many investigations are lodged and then quickly closed once QDOS stepped in.

i dont need to explain myself to you but as i say i have absolutely no doubt on my ir35 status and neither does anyone i work with

[Qdos Contractor]

Fair enough. The tax loss cover is still a waste of money IMHO, whether it fits the Ch. 8 or Ch. 10 frameworks. It's the legal expenses cover that you want, and that is what shuts down compliance checks - dealing with HMRC promptly, accurately and carefully - not the promise of covering tax losses "subject to a reasonable prospect of success". The chance that a contractor or supply chain with a "reasonable prospect of success" subsequently loses their case appears to be vanishingly small. Have you had a single claim pay out a tax loss? How many claims have settled because there hasn't been a reasonable prospect of success? Have you pursued any marginal cases with a view to generating a tax loss claim for advertising purposes? I'm not trying to trap you with these questions, I'm genuinely interested, as the first question arises quite often in these discussions and, despite my assertion that the risk is vanishingly small, it is a difficult risk to quantify without data.

Conversely, legal expenses are absolutely guaranteed from day 1 and may far exceed the tax owed. Cover offered on that basis by QDOS, IPSE or similar is certainly worthwhile. However, unless you can correct my assertions above, the promise of (conditional) tax loss cover is just a mechanism to boost fee income for a risk that is trivially small in practice.

The “prospects of success” condition (which is naturally commonplace in insurance policies of various types) has certainly been a regular topic of conversation over the years. In our view it is a bit of a red herring; we have never pulled out of covering an IR35/off-payroll case due to a lack of prospects of success. Indeed, with the policy I mentioned above, these “prospects” are automatically deemed to have been met if Qdos carried out the original assessment – which will be the case in every instance.

I would also disagree that a case which had “prospects” on day one of an investigation carries a trivially small risk of liability.

In the early years of the chapter 8 rules we, and other professionals like us, certainly had a very high success rate in defending cases. As time has progressed this has changed, both because of increasingly convoluted case law but also the increase in HMRC’s aggression in pushing cases through the tribunal system. As we’ve seen in recent years, the results of tribunal cases are far from predictable.

Whilst I can’t give details, we have very recently settled a chapter 8 case which had been running for 10+ years and will benefit from the full indemnity limit of the liability portion of our cover.

[jamesbrown]

We do provide this cover and have done since the 2017 reforms in the public sector. Over 2,000 agencies, consultancies and clients across both the private and public sectors benefit from the insurance, which sits behind our overarching status assessment and consultancy service. We have closed down several HMRC compliance checks under this policy.

This particular policy does not involve the contractor; the main policyholder is the organisation we are contracted by (generally an agency or engager) with cover extending to other parties in the chain who have a potential liability.

As alluded to in the thread, we still separately provide the Chapter 8 policy which can be purchased directly by contractors.

Fair enough. The tax loss cover is still a waste of money IMHO, whether it fits the Ch. 8 or Ch. 10 frameworks. It's the legal expenses cover that you want, and that is what shuts down compliance checks - dealing with HMRC promptly, accurately and carefully - not the promise of covering tax losses "subject to a reasonable prospect of success". The chance that a contractor or supply chain with a "reasonable prospect of success" subsequently loses their case appears to be vanishingly small. Have you had a single claim pay out a tax loss? How many claims have settled because there hasn't been a reasonable prospect of success? Have you pursued any marginal cases with a view to generating a tax loss claim for advertising purposes? I'm not trying to trap you with these questions, I'm genuinely interested, as the first question arises quite often in these discussions and, despite my assertion that the risk is vanishingly small, it is a difficult risk to quantify without data.

Conversely, legal expenses are absolutely guaranteed from day 1 and may far exceed the tax owed. Cover offered on that basis by QDOS, IPSE or similar is certainly worthwhile. However, unless you can correct my assertions above, the promise of (conditional) tax loss cover is just a mechanism to boost fee income for a risk that is trivially small in practice.

[Qdos Contractor]

All of the above speaks to cover for professional fees, not tax loss. Basically the scenario where “you do your due diligence” and then you lose is really very unlikely. Either way, I think we’re talking about Chapter 8 here, not 10, so small or overseas clients. I don’t believe QDOS provides broader tax loss cover for an entire supply chain, which would be needed under Chapter 10. As I recall, Kingsbridge is (or was) the only provider offering that.

We do provide this cover and have done since the 2017 reforms in the public sector. Over 2,000 agencies, consultancies and clients across both the private and public sectors benefit from the insurance, which sits behind our overarching status assessment and consultancy service. We have closed down several HMRC compliance checks under this policy.

This particular policy does not involve the contractor; the main policyholder is the organisation we are contracted by (generally an agency or engager) with cover extending to other parties in the chain who have a potential liability.

As alluded to in the thread, we still separately provide the Chapter 8 policy which can be purchased directly by contractors.

[jamesbrown]

But here is the problem, everyone thinks they fall outside but a) HMRC just don't think so across the board and b) most people don't know enough about IR35 to be sure. If you do you due diligence getting your contract checked, acting properly and not letting your determination slip then you will be covered by the insurance.

But I'd ask why you think you are as everything is determined by the client via SDS now so what you think doesn't matter. That is unless your client is classed as a small company. So are you doing your own determination or do you have an SDS?

It's not the ruling you need to be worried about, its the cost of the investigation. Ideally you would be right you are outside and HMRC will lose but without insurance that could still be crippling. And as I say, if you due your diligence it will be covered. We don't hear about many cases in the media but many moons ago QDOS gave us a hint at how many investigations are lodged and then quickly closed once QDOS stepped in.

All of the above speaks to cover for professional fees, not tax loss. Basically the scenario where “you do your due diligence” and then you lose is really very unlikely. Either way, I think we’re talking about Chapter 8 here, not 10, so small or overseas clients. I don’t believe QDOS provides broader tax loss cover for an entire supply chain, which would be needed under Chapter 10. As I recall, Kingsbridge is (or was) the only provider offering that.

[northernladuk]

i am absolutely certain i fall outside of ir35, so yes perhaps it is pointless. or as you say, whatever the case, it is pointless.
i will look at downgrading to the cheaper option of legal protection only

i had always assumed previously that if HMRC ruled i was wrong and tried to claim £££s back from me in unpaid tax, that QDOS would just pay me back. but i guess i was living in a dream world.

But here is the problem, everyone thinks they fall outside but a) HMRC just don't think so across the board and b) most people don't know enough about IR35 to be sure. If you do you due diligence getting your contract checked, acting properly and not letting your determination slip then you will be covered by the insurance.

But I'd ask why you think you are as everything is determined by the client via SDS now so what you think doesn't matter. That is unless your client is classed as a small company. So are you doing your own determination or do you have an SDS?

It's not the ruling you need to be worried about, its the cost of the investigation. Ideally you would be right you are outside and HMRC will lose but without insurance that could still be crippling. And as I say, if you due your diligence it will be covered. We don't hear about many cases in the media but many moons ago QDOS gave us a hint at how many investigations are lodged and then quickly closed once QDOS stepped in.

[genius]

i am absolutely certain i fall outside of ir35, so yes perhaps it is pointless. or as you say, whatever the case, it is pointless.
i will look at downgrading to the cheaper option of legal protection only

i had always assumed previously that if HMRC ruled i was wrong and tried to claim £££s back from me in unpaid tax, that QDOS would just pay me back. but i guess i was living in a dream world.