Is QDOS TLC35 better than legal cover?

[dingdangwang]

What are the advantages of getting QDOS TLC35, over the option for legal cover that I can get with my business insurance?

In brief, I could pay £380ish for £50k of indemnity at QDOS TLC35 (policy wording), or...
pay a little more premium on my business insurance for £100k of legal expenses cover (here's their policy wording).

What would you do?

[Qdos Contractor]

What are the advantages of getting QDOS TLC35, over the option for legal cover that I can get with my business insurance?

In brief, I could pay £380ish for £50k of indemnity at QDOS TLC35 (policy wording), or...
pay a little more premium on my business insurance for £100k of legal expenses cover (here's their policy wording).

What would you do?

Just in the interests of ensuring you are comparing like for like: TLC35 covers £50k defence costs plus £50k of IR35 liabilities (i.e. tax, interest & penalties if you are caught by IR35). Legal expenses will cover the defence costs only.

A typical IR35 enquiry would cost ~£15-20k in fees to defend.

[VillageContractor]

For me its a no brainer. 1 days rate a year for peace of mind

[yMyjgT]

Just in the interests of ensuring you are comparing like for like: TLC35 covers £50k defence costs plus £50k of IR35 liabilities (i.e. tax, interest & penalties if you are caught by IR35).

Sorry OP to sidetrack slightly....In the TLC35 wording it says you have to confirm (to the best of your knowledge) the below statement is true. How does one confirm the right exists in practice, in advance?

You are under no obligation to exercise your right of substitution, however the right must exist in practice – a written right of substitution in your contract is not sufficient unless it would be honoured by your client.

If I have a discussion with the hiring manager, and he confirms it's possible, is that enough? And what happens if I confirm it's true, but the reality turns out otherwise during an HMRC investigation? Does it invalidate the insurance?

[PerfectStorm]

That sounds like an easy get-out of covering a LOT of contracts.

Last time I checked, this policy had never paid out to anyone either. They've perhaps not had to, or not taken on some cases (?)

[malvolio]

That sounds like an easy get-out of covering a LOT of contracts.

Last time I checked, this policy had never paid out to anyone either. They've perhaps not had to, or not taken on some cases (?)

They are in effect insuring themselves against something that they are already convinced will never happen. So it's not surprising nobody's claimed against it yet. But if it makes people feel more secure then it's their money.

The quoted condition is fairly standard and the necessary wording is along of the lines of "such permission not to be unreasonably withheld" - but let us not forget that one IR35 case was lost partly because the judge allowed the client's representative, who had no knowledge of the engagement, claim that his company would never honour such a clause anyway. Which is an interesting interpretation of contract law all of itself, and also highlights the problems we face when we have no knowledge of what has been agreed between agent and client and so we have no control over whether the two contracts are aligned.

[Qdos Contractor]

That sounds like an easy get-out of covering a LOT of contracts.

Last time I checked, this policy had never paid out to anyone either. They've perhaps not had to, or not taken on some cases (?)

I don't think we've ever rejected a claim based on those application statements. As I've said before, if we regularly rejected claims it would soon become public knowledge and wouldn't do our reputation any good.

I do appreciate the inherent suspicion around insurance, particularly when it's a unique risk like IR35. However, our background is in tax consultancy: we are not a typical insurance broker and our tax policies are specifically to back up our in house expertise.

We have certainly never refused to pay out on the liabilities portion of a policy having represented the contractor in a case.

[Qdos Contractor]

They are in effect insuring themselves against something that they are already convinced will never happen. So it's not surprising nobody's claimed against it yet.

It really isn't that simple. I have a weekly meeting with our Head of Tax, Andy Vessey, where he will run through the live cases in detail. They are complex, unique, demanding and far from forgone conclusions.

Whilst it's tempting for us to bullishly refer to our win/loss record, the reality is that many cases we deal with could go either way right up until the end. We are currently waiting for a judge to give their verdict on the first IR35 tribunal for 7 years and we genuinely have no idea what the outcome will be.

[malvolio]

It really isn't that simple. I have a weekly meeting with our Head of Tax, Andy Vessey, where he will run through the live cases in detail. They are complex, unique, demanding and far from forgone conclusions.

Whilst it's tempting for us to bullishly refer to our win/loss record, the reality is that many cases we deal with could go either way right up until the end. We are currently waiting for a judge to give their verdict on the first IR35 tribunal for 7 years and we genuinely have no idea what the outcome will be.

Fair enough and thanks for the information. I fully agree that all such cases have been a very long way from foregone conclusions.

Once possibly off-the-wall question though - what are the chances of someone claiming against your policy to pay the unpaid tax and someone in Westminster then deciding that you should not be able to insure against something that is legally owed but not paid, and therefore suffers no penalty from being caught by IR35?

[Qdos Contractor]

Once possibly off-the-wall question though - what are the chances of someone claiming against your policy to pay the unpaid tax and someone in Westminster then deciding that you should not be able to insure against something that is legally owed but not paid, and therefore suffers no penalty from being caught by IR35?

Given the practical application of the IR35 legislation is complex and enquires are so convoluted, I think the chances of arguing that insuring an IR35 liability is against public policy would be very slim indeed. Ultimately a contractor who presented the strongest possible case at the outset could be unwittingly scuppered by questionable client evidence. Every case is unique and none are certain, with factors outside of the insured’s control having significant potential bearing.

The policy has been around as long as the legislation itself. FCA regulation naturally requires rigorous scrutiny of all policies, both in their concept and their application, and we (and our insurers and auditors) are absolutely confident in the validity and extent of the cover.

Seb