We have always recommended that our clients take out tax investigation insurance and it is now more important than ever.
Insurance is not the most thrilling of subjects and is probably regarded by many as a necessary evil of the modern world.
We all (I hope) insure our cars, homes and lives but what about our accounting and tax affairs? This could be increasingly important in the months ahead as HMRC takes a closer look at tax returns as the country recovers from the pandemic.
What is tax investigation insurance?
In layman’s terms a tax investigation insurance plan covers you, the taxpayer, for the accountancy fees incurred in dealing with an investigation into your business or private financial affairs by HMRC.
HMRC tax enquiries are often stressful and time consuming. You can incur large additional accountancy fees to cover the cost of replying to HMRC’s questions. Unfortunately, this is the case even if you have done nothing wrong. HMRC will not pay the fees for you.
So, if you do happen to get investigated or checked by HMRC, the policy may well save you thousands. Conversely, if you do not receive a dreaded letter from HMRC then it may seem like a waste of money.
Increasing scrutiny from HMRC
At Thomas Westcott, we are well aware that the number of checks made by HMRC is likely to increase in the next few years. This is because the government will try to audit, and possibly claim back, money from Covid-19 related support schemes. We are also likely to see more compliance checks to ensure support programmes, such as the Job Retention Scheme and Self Employment Income Support Scheme, were administered correctly and within the guidelines.
News reports have already revealed that HMRC is investigating so-called ‘furlough fraud’ and claims of restaurants abusing the Eat Out to Help Out scheme.
In the coming months, this could expand into other areas. We are likely to see HMRC carrying out more scrutiny across all taxes relating to businesses and private individuals.
Leaving an HRMC investigation to the professionals
An HMRC investigation can take many months. While a tax investigation insurance policy will not cover any tax found to be owing, it will pay for your accountancy fees in full. That means you can leave the investigation in professional hands without any worry about the accountancy costs.
This means that tax specialists in accountancy firms like ours can then devote all of our efforts to prepare the best defence of any taxation issues and negotiate the best possible outcome for you or your business.
Yes, insurance may be a dull, dry subject - even with singing Welsh tenors & puppet Russian meercats in the TV advertisements. However, a tax investigation insurance policy could really save the day when HMRC come calling.
By Ann Jackson, Partner