If you are subject to an HMRC enquiry you can incur significant amounts in accountancy fees, even if at the conclusion it is found that there is no additional tax to pay.
For a very modest premium, Tax Investigation Insurance or fee protection insurance as it is sometimes known covers accountancy fees incurred by your accountant in the event of an enquiry, providing you with peace of mind, knowing that your accountant’s fees are covered and you have the resource to provide a strong defence.
Being the subject of an HMRC enquiry is stressful and tax investigation insurance will help you to relax.HMRC were targeted with achieving additional tax revenues of over £28 billion through compliance activities in 2017/18. They achieved £30.3 billion according to their annual report. In the past decade the number of enquiries undertaken by HMRC has increased significantly year on year. Any individual or business can be subject to an enquiry, even if your affairs are in order.
Through Sch36 of the Finance Act HMRC has wider powers than ever before. In recent years HMRC has recruited 2,500 new Compliance Officers to help achieve their ambitious targets.The chances of you being subject to an HMRC enquiry have never been higher.
An illustration of how the insurance works:
We have been asked multiple times to provide an example of what the insurance does.
Using very simplistic numbers:
Your tax affairs are chosen for an enquiry and HMRC request some more information than the basic records (this is the norm). HMRC review the records and dispute the figures. You are notified by HMRC that you/your business owes £4,500 in unpaid tax. You instruct your accountant to work on your behalf and provide information to HMRC and hopefully get the tax demand down.
Let’s say the accountant spends £1,500 of their time.
Without Tax Investigation Insurance
The best case scenario: your accountant manages to get the tax bill down to £0, you still have to pay £1,500 in total with their fees.
The worst-case scenario: your accountant hasn’t been successful so you owe the £4,500 to HMRC and £1,500 to the accountant meaning your total is £6,000.
With Tax Investigation Insurance
The best case scenario: your accountant manages to get the tax bill down to £0 and the £1,500 is paid for by the insurance. Your total is £0
The worst case scenario: your accountant has not been successful, so you owe £4,500 to HMRC but the professional fees are paid for by the insurance meaning your total is £4,500.
Please remember- Tax is not optional and Tax Investigation Insurance does not cover the amount owed to HMRC. It simply covers the professional fees associated with a HMRC enquiry.
Please contact us for further information.Disclaimer: This App and its contents have been produced as a helpful reference point. The information should be used as a guide only and your specific circumstances are best discussed directly with us.No reliance should be placed on this material and no action should be taken without seeking the appropriate professional or legal advice. Although the authors make reasonable efforts to ensure the content of this App is accurate and up-to-date, the authors make no representations, warranties or guarantees that the content is accurate, complete or up-to-date and accept no responsibility whatsoever for any loss occasioned by anyone acting on information within this App.