For many limited company owners, tax investigation insurance could prove to be a wise investment, as it provides cover for the costs of professional representation in the event that your tax affairs are investigated. It also tends to be a low-cost type of insurance.
What are the benefits of cover?
Even if you are certain that you have been 100% compliant with your tax affairs, being notified of an HMRC enquiry can be stressful – not least due to the previous time company owners will have to dedicate to dealing with the tax authorities.
Here are the most common types of enquiry which may be initiated by HMRC, and therefore covered by tax investigation insurance:
- Professional represeentation at a PAYE/Employer compliance review
- Professional representation for status enquiries (IR35 investigations)
- Value Added Tax (VAT) disputes
- Pay-As-You-Earn (PAYE) and National Insurance (NIC) disputes
- Aspect or Full HMRC enquiries
- Enquiries involving ‘income shifting’ (Section 660A)
Although initial enquiries may appear to be trivial to company owners on first inspection, most experts suggest that they are best handled from the very start by professional tax specialists who know from experience how to deal with HMRC. If company owners deal directly with HMRC, they may end up in the middle of a more extensive tax investigation if they have not responded in the right way.
If you receive notification of an HMRC enquiry, the paperwork will be dealt with by a tax specialist, and will cover the costs of professional representation all the way to a Tax Tribunal if necessary.
Taking out a tax investigation insurance policy
The components of a typical tax investigation insurance policy will vary from firm to firm – and the amount of cover you receive will also vary according to what you pay for.
Some insurance packages also provide additional cover to settle the costs of any additional taxes and penalties that are subsequently found to be owed following an investigation. Clearly, policies which cover potential back taxes will attract a significant premium to the ‘standard’ policy which covers the cost of professional representation.
Tax investigation insurance tends to be reasonably priced – Freelancer Tax Protection from Qdos, for example, costs £117. This particular product is aimed at contractors and freelancers, although the Qdos team can also offer full cover to all types of business.
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- Join PCG - Free impartial start-up advice for contractors.
- Visit Qdos Consulting for tax investigation cover and IR35 insurance.
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