What is tax enquiry insurance?
This is insurance that pays the cost of our fees as your tax advisor and also those of any necessary specialists in dealing with an HMRC enquiry into your tax affairs.
If HMRC decides to ask for further information or open a formal enquiry into your tax affairs the insurers pay the fees that we would otherwise have billed to you for handling this enquiry through to its resolution.
Why do we recommend this insurance?
HMRC’s sole mission now appears to be to collect as much tax as possible. The Taxpayers Charter used to say “we want to collect the right amount of tax” but this receives no more than lip- service now from HMRC. They pursue taxpayers ever more aggressively whenever they think there is an opportunity to assess additional tax. It appears that many HMRC staff now receive bonuses based on the amount of revenue they have raised, and have targets for the amounts to be collected.
A typical enquiry will involve several exchanges of letters with HMRC, often with the need to research detailed figures on accounts or tax returns in order to answer HMRC’s questions, and these sometimes lead to further questions and further enquiries. An enquiry can often take between six and eighteen months to finalise. Typically, our fees for dealing with an enquiry from beginning to end are likely to be in the region of £800 – £2,000.
Inevitably, some clients feel under pressure to pay what HMRC are demanding even though they don’t believe it is actually due, simply because it is cheaper. With insurance in place, you can rest assured that we will be in a position to strongly defend any attacks by HMRC and seek the best possible solution without you having to worry about the additional costs accruing.
What taxes are covered?
If you run a business, the insurance will cover corporation tax enquiries, PAYE queries and investigations, VAT and enquiries into your personal tax return and those of any other directors, provided we prepare those tax returns on your behalf.
If we simply help you with your income tax affairs the insurance covers any enquiries into your personal tax, and so includes both income tax and capital gains tax.
Are there any other benefits?
Yes, the insurers provide free helplines for assistance on legal problems and also HR queries.
What period does the insurance cover?
The insurance runs from 1 December to the following 30 November and needs to be renewed annually. The insurance will cover any claim that arises in a particular policy year regardless of the fact that the tax year that the enquiry relates to may be an earlier one.
Is there anything the insurance does not cover?
The insurance doesn’t cover any additional tax or National Insurance or VAT that is properly payable. It also doesn’t cover penalties or interest if tax has been under-paid and HMRC has correctly assessed it. Cover may not apply if your tax returns are filed late.
Why is VAT charged on the premium?
We invoice this premium to you as a service and therefore it is subject to VAT at the standard rate. If you run a VAT-registered business you should be able to reclaim the VAT as input tax. No insurance premium tax is payable on this payment.
Any more questions?
Please email John.