Tax Investigation Insurance

Laurajo_2

Just thought I'd throw in my two cents;

Personally, I think whether or not the enquiries are random is a moot point; although some people and businesses are more likely to come under higher scrutiny, I think it's safe to say that there is a degree of risk for anybody within the tax system.

We offer coverage to every client - from our point of view, if we haven't made a client aware that we offer such a service, and then they are hit with an investigation which results in £0000's of additional fees, not only have we not done our best to protect our client from the additional charges, but they could also potentially make a claim against us. We do only charge what the insurers charge and don't 'add on' a premium like some firms do, however I would agree that the wording of the insurer's literature which we send to the client is very scary and I do have an issue with it.

I think as an individual you need to apply common sense; if you have very simple tax affairs (for example, are only in SA because of the child benefit charge) it may not be worth it.

If you are running a large business, employing staff, paying expenses and vat registered, the sheer number of areas where there could be an enquiry is increased and it would be madness not to protect yourself against an enquiry. Also, bearing in mind that if you have, for example, a PAYE enquiry that throws up a fair few errors, it will increase the chance of enquiries into other areas.

I would also say make sure you know what your insurance actually covers....for example, if you have a PAYE inspection, does it cover the cost of your accountant attending on the day, meetings with hmrc etc? Does it cover all the various types of enquiries, 'checks' and inspections applicable to you? Or is the cover excessive for what you need, in which case, try and negotiate cheaper if possible.

I would say make sure aspect enquiries are covered - these are a heck of a lot more common than full enquiries and aren't always covered. Y such insurances,

chrismac1

I've posted this story before but I think some folk may find it useful. HMRC regularly attack whole sectors with a big campaign. When it was the dancing school sector, a client with 23 tutors got the dreaded letter which arrived on the Thursday.

The inspector planned to attend on the following Monday at my client's premises. I rang her up, this in my view is good practice to establish who you are up against and what issues might arise, whether it's a Rottweiler or a decent person and so on.

She confirmed the purpose of the enquiry was false self-employment. I asked why my client had been chosen.

HMRC: It has over 20 instructors.

Me: Yes, all 23 are on the books. We paid you £18k in PAYE and NI last tax year and are on track to pay even more this year.

HMRC: Did you?

Did you? DID YOU? What is that??!

The following day she rang to call the whole thing off. It was going to be a full day thing, 180 miles round trip for her and her colleague.

On the one hand, this could be good news if you get a letter. You might have been selected through sheer incompetence on HMRC's part alone. On the other hand, even if you have been selected incompetently, you may not be able to head off the visit so easily and so that's an argument for having the insurance.

As it happens I've just sent out my annual letters to those 15% of client who are not insured but who I think should be. Here's the list I gave of things which can trigger an enquiry:

1. Disgruntled staff or former staff.
2. Problems with record keeping especially cash handling and the split between business and personal expenses.
3. Employment status issues such as IR35.
4. VAT and PAYE returns which are unusual or appear to be incorrect.
5. High levels of refurbishment expenses.
6. Late or consistently "just in time" submissions of tax returns.
7. Alphabet shares and potential income shifting.

Howard1

After reading all the threads on taking out insurance on tax investigation, I'm even more baffled!
My wife and I finished the b&b business last April 2013 and I currently run my satellite sole trader business with only me as owner. The b&b made less than £15,000 ( at a loss) year ending April 2013 and my satellite business this year made less than £17,000 (both gross) Our accountant is strongly advising us to cover the b&b business even it finished last year and to cover my current business as a satellite engineer for well over £300 which seems steep to say the least!
Would love some expert advise on what to do!!

chrismac1

Very hard to justify £300 for that!

AppletonPrac

I have been asked to look into tax investigation insurance by my boss as she is being pushed by her accountants to take it up. However she has a number of limited companies and the accountants have quoted £385 per limited company. In the event of needing to claim, am I right in thinking that the costs involved would be up to £5k per company or is that for the investigation as a whole?
The policy states the £385 fee is for turnovers up to £10m, does this sound reasonable?
Thanks

sunshinetours

AppletonPrac wrote: »

I have been asked to look into tax investigation insurance by my boss as she is being pushed by her accountants to take it up. However she has a number of limited companies and the accountants have quoted £385 per limited company. In the event of needing to claim, am I right in thinking that the costs involved would be up to £5k per company or is that for the investigation as a whole?
The policy states the £385 fee is for turnovers up to £10m, does this sound reasonable?
Thanks

Sounds quite expensive and see if any discounts for groups of companies. Our insurance provider gives us a discount if we look for a quote for a group of companies (even if not a formal group) which we pass on to our clients.
We also cover personal affairs of director/secretary if we do their returns with the fee aswell so see what is covered

Fee cover on ours is generally upto £100k per claim so should cover 99.999% of most cases!