Tax Investigation Insurance Pricing

chintanm78

Hi there,

I have recently received what I would deem to be quite a scaremonger style email from my accountant regarding Tax Investigation Insurance.

I assume as the result of a recent investigation which has cost a great deal of time, they have said that from April 5th they will automatically be signing all clients up to the service at a price of £16.50+VAT a month over £200 a year covering business & personal.

Personal cover may be necessary if you have rental income or your SA is not straightforward. I hadn't heard of this until now and the advent of more HMRC officers may have prompted this but yet more insurance for a will it won't it scenario SIGH

Apart from the PPI nature of the email, I assume irrespective of your turnover being relatively small i.e. less than £50k a year and your business transactions being limited, anyone can be in line for a HMRC investigation.

So if I wanted to contract a policy privately the best price I can obtain is from the online arm of PFP at £150 a year which covers me for both business and personal tax investigations and may include the use of my own accountant and covers a host of scenarios including aspect enquiries which are apparently an investigation into say VAT which turns into a business investigation.
http://www.feeprotection.com/policies

Tax Assist is now TaxClub who are £15 a year + £4 per director

Abbey Tax who provide the cover for the FSB £172.50 per year + £60 for personal cover.

The FSB policy is effectively £150 1st year membership and £80 for an associate. It only covers personal enquiries should it arise as a result of a business investigation and doesn't cover IR35 enquiries or use of your own accountant.

I would most appreciate any advice as to which policies/companies are better, anyone with experience of using them with a tax investigation?

Having searched previous threads seems to indicate £90 a year is an ok price but that may be a basic policy or due to the date of the thread but I can't find anything at that price

Chrismac1 or pennywise I have seen you have both posted here with some really useful and informative answers

Pennywise

ok, I'm obviously biased, but I would always recommend that you choose a policy that covers your own accountant to deal with any tax enquiries. Otherwise, you'll end up spending time and energy to explain your business and personal affairs to someone you've never met before, often due to distance by phone or a time consuming travel to a meeting, etc. Over the years, I've had clients who were covered by FSB (and others) who insisted on their own "specialists" and every time the client has told me it was a right royal pain in the bum having to go over old ground with someone new.

Another issue with some of the "free" or association-based policies is that they don't include IR35, don't include the new "business record checks" - some don't even include "aspect enquiries" when it's only one or two items on a tax return that are being queried rather than a full enquiry into it all.

I'm sure that I use the same firm as Chrismac - the policy we offer to our clients includes ourselves dealing with the HMRC, it also includes IR35, aspect enquiries, and even attendance at the business record checks (even if it's just sitting there watching whilst the tax man looks through your files!). If things get too technical and we need specialist advice, then we have access to the insurer's specialists for either advice or for them to seemlessly take over the case if it's gone out of our comfort zone. We charge between £25 and £80 p.a. and I think Chrismac charges similar. The policy is backed by one of the main players in the tax enquiry market.

Unfortunately, it's not available direct to businesses on the same terms or for the same cover, so the only way to get it is via an accountant who uses that scheme.

The best way is to shop around as you've done, make a list of what each policy covers, and then make an informed decision. I wouldn't necessarily suggest that you change accountants unless you are unhappy with them for other reasons also.

At the end of the day, though, I would suggest that you do make provision and get insurance from someone. I've seen far too many horror stories, even for people with relatively simple affairs with low sums of money involved, that have turned into money pits with professional fees soon rising into the thousands, even where they prove to be innocent - there's no come back to reclaim their costs!

chrismac1

Mine is £90 per year including VAT. My entire client base is insured, I offer this option to clients and also every year give all clients a risk evaluation specific to their business. In fact 60% are assessed as low risk - simple affairs or just tax return clients - and on my advice do not take up the insurance.

I had 2 claims in the past year of insurace, both pretty Mickey Mouse and under £300. One was just an HMRC error in selecting my client for enquiry, the other was routine checking of a VAT reclaim.

What I can say is that my reply to both of these enquiry letters was made in full by e-mail (backed up by postal follow up) within 48 hours of receipt of the enquiry letter.

This sends out a clear message to HMRC:

1. This is a credible business with credible systems.
2. It can back up the VAT return, for example, immediately in full.
3. It has an accountant who can move fast.

Overall likely to be a tough nut to crack, I hope. All enquiries my entire client base has faced have been closed within 30 days of HMRC opening them. Whilst this is unlikely to happen in the event of an IR35 enquiry, for example, many accountants will not even have replied within that 30 days.

If your business is anything other than trivial, £90 is usually excellent value.

chintanm78

Thank you both of you so much for such quick replies. Actually my accountant has just come back to me and said that based on my turnover that I'm actually covered for 20 hours work and aspect enquiries so he doesn't advise that we need the policy.

It's interesting to note the way you go about advising your clients, I like Chris' approach of an assessment at least giving a reason as to why you might be more at risk and the £90 is much more reasonable and indeed an easy decision to say yes to. If you are able to PM me the name of the company I will pass it on to my accountants. I'm not adverse to a small amount of profit being added but ultimately it helps both parties in the scenario a small company gets a big bill to deal with it's covered.

Does the policy cover personal tax investigations as well?