Small businesses across the country are facing an ever-increasing level of scrutiny from HMRC.
In recent years, new powers have been handed to HMRC to help it police the UK tax regime. This is posing problems for small business owners, as even those submitting their returns accurately and on time can find themselves under the spotlight of HMRC.
This is particularly the case for businesses operating in ‘at-risk’ sectors typically where they are cash based businesses.
The trouble is that complying with an HMRC tax investigation is not cheap. As part of its enquiries, HMRC will request information from a business, and it is often the company accountant who will deal with these requests.
On average, full HMRC investigations last 16 months, and can potentially cost £5,000 in accountancy fees. That is why some business owners are choosing to cover themselves against these costs with HMRC investigations insurance.
What is HMRC Investigations Insurance?
HMRC investigations insurance is an insurance policy that covers a business against the costs of defending HMRC actions, including investigations into VAT, PAYE and self-assessment. It can also cover the expenses of appealing a HMRC decision, and provide free access to professional legal and tax advice throughout the investigation.
Typically policy covers:
- The cost of dealing with any correspondence from HMRC;
- Attending any meeting with HMRC up to and including an appeal to the First-tier Tribunal or Upper Tribunal;
- The cost of any professional fees to appeal the decision in court.
Only Conscientious Taxpayers need Apply
It’s important to understand that this type of policy will only provide the cover you need if you are a conscientious taxpayer. You must file the appropriate returns accurately and on time for the cover to be valid. It’s also worth noting that the policy will not cover the cost of any underpaid tax or the associated interest payments, fines and penalties that may result from an investigation.