Continued Coverage: TP Insurance Renewals Clearly, TP issues present an ongoing operational risk for businesses. In response to this, there is a growing appetite in the insurance market to provide TLI policies that can be renewed annually.
• Additional premium – This will be a fraction of the original premium given that the renewal policy covers only those tax authority challenges that may arise relation to the previous 12 months. Periodically, an updated benchmarking exercise may also be required, depending on what is considered appropriate for the sector. There is appetite to provide forward looking cover in this regard, also on a 12 month renewal basis. Ultimately, the level of diligence required for a TLI policy in relation to TP risk is no more expansive than the level of diligence a prudent tax payer would conduct to evidence its TP policy in the absence of insurance.
Such policies provide continuous cover in relation to TP risks while the underlying premise for TLI remains the same; a policy is placed based on the technical analysis of a risk, providing cover in the event that a tax filing position (at or before the date the policy is placed) is challenged by a tax authority. What would be required at the point of renewal? • Some level of top up diligence – Business tax advisors would conduct a high level review to confirm that no circumstances arose necessitating a TP adjustment in the previous 12 months.
What do we need from you to get started? The BMS team will be able to guide you on the information and documents required.
An overview of the TP risk and context in which it arose.
A copy of an opinion/ memo detailing the tax-technical analysis, the financial exposure and the likelihood of the tax authority’s success in challenging the tax position.
A calculation of the likely tax liability and associated costs (e.g. defence costs, applicable interest and late payment penalties).
A summary of the underlying transaction (in the case of an M&A related TP risk).
Contacts Please contact the team at m&a@bmsgroup.com or alternatively speak to one of the teammembers directly:
Dean Andrews Head of Tax Liability Insurance T: +44 (0)20-7480-0308 M: +44 (0)7876-815-643 dean.andrews@bmsgroup.com
Jessica Bradley Associate Director
Martijn de Lange Managing Director T: +852 3579-5486 M: +852 9772-9951 martijn.delange@bmsgroup.com
T: +44 (0)20-7374-5109 M: +44 (0)7880-443-186 jessica.bradley@bmsgroup.com
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