IR35 Tax Liability Insurance

[lawspeed]

We are in the process of revamping our existing IR35 Tax-Safe insurance product issued by 'Abbey Tax Protection' and we are working with the insurers and underwriters to try to bring down the premiums. Presently the policy prices range from £396 to £600 for a typical 12-month period dependent on the level of turnover.

Given that this insurance covers the actual IR35 tax, NIC's, interest and penalties (which often amounts to £10,000 - £20,000), what do people think would be achievable as a pricepoint to make this product attractive? The review process is required first (we provide our formal legal opinion) and this is between £210 - £260 + vat for the review stage, the insurers require this before they can offer the insurance.

Would appreciate your thoughts?

 

[Alpha]

James

Without knowing the full details of the policy it is difficult to give a fair answer.

How does this policy differ for example, from the PEI policy provided as part of the PCG membership which is also issued by Abbey Tax Protection and serviced by Lawspeed?

 

[lawspeed]

Thanks for your reply.

This IR35 Tax-Safe policy (let's call it TS) actually dovetails with the PEI.

The PEI covers the representation costs (i.e. our fees to defend the client if the Revenue comes knocking). If we should ever be unsuccessful in defending our client under the PEI, the TS would kick in to effectively pay out the Revenue's demanded taxes, NIC's, interest and penalties.

 

[Alpha]

James

If that policy kicks in only after you have unsuccessfully represented a client I would have that thought that with Lawspeeds record you would find it difficult (or impossible) to sell that policy. (Correct me if I'm wrong put i don't believe that you have ever lost an IR35 case).

So with the likelihood of you losing a case taken into consideration it must be a very low risk that the second insurance will ever be paid out so how would it compare to say other insurance policies such as PI paying out such a small sum(£10k - £20k) compared with policies paying out £250k.

I would expect the annual policy cost to be quite small (in the region of £50 - £75 max)

 

[lawspeed]

Really appreciate the feedback. PI policies and premiums are based on the fact that the chances of an actual PI-relevant dispute arising are minuscule (although rising) in the standard contracting industries and the numbers of policyholders are huge so insurers can spread the risk very widely. Neither of these facts really applies to IR35 disputes.

Tax-Safe allows a company to invest the potential IR35 liability more wisely whereas a prudent company without insurance would typically need to keep the funds available on ice in case a dispute should ever occur with the Revenue (ultimately the Revenue can pursure the individual director/shareholder directly for IR35 liability). Of course, what the product really provides is 'peace of mind' because a lot of the damage caused by IR35 is the concern, worry and distress that arise when that dreaded Revenue letter comes through the door!

Insurance of this nature is inevitably going to be a 3-figure sum but we'll certainly be negotiating with the insurers to get it as low as possible.

 

[Alpha]

Of course, what the product really provides is 'peace of mind' because a lot of the damage caused by IR35 is the concern, worry and distress that arise when that dreaded Revenue letter comes through the door!

but as I said i 'm sure you havent lost a case yet(unless you would like to confirm otherwise) so most contractors that you talk to nowadays are actually quite blase about it.

 

[lawspeed]

... until the letter comes through their door and they experience the Revenue's bully-boy tactics first-hand!

At present we have won every finalised case that we have taken on as representatives, but this has often taken months and even years of correspondence and argument, often involving third parties/clients, and usually with a lot of worry, distress and stress for the company under investigation.

 

[lawspeed]

bump... rebranded as Survive35 Tax-Safe, insurance covering the actual additional IR35 tax, NIC's, interest and penalties arising from an unsuccessful IR35 investigation.

12-month Policy Pricing Update:

Contract Value Policy Price

Up to £50K ------ £250

£51-£75K ------ £273

£76-£100K ------ £295

£101-£150K ------ £329

£151-£200K ------ £395


http://www.lawspeed.com/providers/p...ce_status_reviews/ir35_taxsafe_insurance.aspx