Tax Investigations can be expensive, often dragging on for a year or longer. For anyone in business, they can come in a variety of flavours:
Full Tax Enquiry – the traditional full-blown enquiry, in which HMRC toothcomb through the whole of your affairs.
Aspect Enquiry – where HMRC focus on one or two areas of your business – eg where motor expenses or cash payments are investigated. This type of enquiry is becoming more and more common.
Employer Compliance Enquiry – where, often following a routine PAYE visit, HMRC challenge your payroll for error or mistake, or for employment status issues.
VAT Enquiry – where, usually following a routine VAT visit, HMRC challenge the validity of your VAT records and claims.
IR35 Status Enquiry – a specialist enquiry that can increase the taxes of people providing their services via a limited company.
These investigations can delve back any number of years, and carry penalties of up to 100% of any tax found due, plus interest on top.
Many accountants offer fee insurance to their clients for premiums typically ranging from £150 to £500 a year depending upon business size and type of cover. As an alternative, some trade organisations such as the FSB (Federation of Small Businesses) offer tax enquiry cover as part of their membership fee.
Here are the common criticisms regarding those types of insurance cover:
Aspect/Employer/VAT enquiries are not covered by the policy;
Claims are limited to a percentage of premiums paid;
Restrictions and conditions can mean no cover when the taxpayer is at fault;
Insurance companies and trade organisations insist on using their own accountants to defend your case and settle HMRC’s claim.
The enquiry help lines are not always technically correct.
Of course, what’s really wrong is that these are insurance policies, and insurance companies will often slide out of paying. Besides, insurance companies have no incentive to obtain a good outcome for you when paying their own accountants to represent you against the tax-man.
Taxsmiths®’ solution is to offer clients who are unfortunate enough to suffer a tax enquiry a 50% reduction in our standard hourly rate (currently £52hr + VAT, so that’s just £26hr + VAT for any enquiry work). Many of our competitors charge well in excess of £100hr for investigation work – some as much as £250hr! Our solution applies to any and all types of enquiry: full, aspect, PAYE, or VAT.
This cover applies free of charge to all clients paying their annual accounts fees by monthly instalment – please ask us to arrange a standing order.
Needless to say, we cannot cover you for any fines or penalties you might receive as a result of a tax enquiry – nobody can do that; neither can we cover you for the cost of our attending any routine visits by HMRC’s VAT or PAYE Compliance departments. But we can cushion you from the huge expense of accountants’ fees to defend yourself should an enquiry take place.
Of course, with so much at stake, not to mention the draconian fines and penalties, it’s important you have accountants who you can trust to fight your case, rather than accountants who might settle expensively for you just because the insurance company want to keep their fees as low as possible. Halving our regular hourly fee to £26 shares with you the risk of tax enquiries, without removing our incentive to fight your cause to achieve the best possible outcome for you.
Tax enquiries, sometimes random, are becoming more frequent. Taxsmiths® are able to offer you peace of mind as standard.