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Does your small business need tax investigation insurance?

Many small business owners assume that if they keep accurate records and pay their taxes correctly, they won’t need to worry about an HMRC investigation.

However, it’s impossible to guarantee that your business won’t be the subject of an HMRC tax compliance check – especially since tax laws are continually changing.

This means that for greater peace of mind and protection against potential financial losses due to a tax investigation, many small businesses opt for tax investigation insurance.

What is tax investigation insurance?

Tax investigation insurance is a type of policy which provides financial cover in case your business is subject to an HMRC enquiry. It also covers any professional costs associated with the enquiry, such as solicitors’ fees or accountancy fees – which can quickly add up if not covered by the policy.

Depending on the provider, some policies may also offer additional legal costs which can come in handy when responding to other types of governmental investigations or disputes with customers or others in the course of running your business.

For most businesses, the information required by HMRC during an enquiry can be quite complex and require help from a professional accountant or auditor to sort through it all – and this service isn’t always cheap.

10 reasons why your business might consider tax investigation insurance

  • Tax laws and regulations change often, leaving even the most experienced businesses vulnerable to errors or misunderstandings that could lead to an HMRC investigation.
  • An HMRC investigation can be complex and time-consuming, and dealing with one can take valuable time away from running your business.
  • Professional fees associated with an HMRC enquiry can quickly add up and become a financial burden on small businesses.
  • HMRC investigations may result in fines or penalties if discrepancies are found in the information supplied by a business.
  • Random selection for compliance checks means that even honest businesses may find themselves subject to an HMRC inquiry at any time – so being prepared is essential.
  • Taking out tax investigation insurance helps you protect yourself financially against potential losses from an investigation – providing peace of mind that your business’ finances are secure against such a scenario.
  • Some policies also provide cover for costs associated with other types of governmental investigations, disputes with customers or other third parties, data protection breach claims, or advice related to audits and assessments by other regulatory bodies such as Companies House or Trading Standards officers – giving you additional protection beyond just tax matters.
  • Having tax investigation insurance in place means fewer worries about the future of your business should the worst happen and you end up subject to an unexpected HMRC enquiry – allowing you to focus on running your business instead of worrying about legal fees and possible fines or penalties due to incorrect information being supplied by your business.
  • Last but not least, having access to a team of professionals who are knowledgeable in tax law and able to look after all aspects of dealing with any type of tax investigation gives you much-needed peace of mind knowing that all bases have been covered if it ever becomes necessary.
  • Tax investigation cover is surprisingly affordable. You can take out cover or as little as £8.25 per month (see below).

What costs may arise during a tax investigation?

The costs associated with responding to an HMRC enquiry or appeal process can include:

  • Professional fees for advice and legal representation.
  • Expenses related to data gathering and other requirements imposed by HMRC.
  • Costs related to appeals processes should they become necessary during the investigation.
  • Fees associated with any settlement negotiations required with HMRC.
  • Fines or penalties that may be imposed by HMRC if discrepancies are found in the information supplied by a business.

How much cover should I take out?

A typical tax investigation policy – such as the tax enquiry protection policy provided by our partner, Qdos – will cover you for up to £50,000 in professional representation costs.

You can also protect your business against the costs of any potential fines and unpaid tax you are subsequently deemed to owe to HMRC. Understandably, the cost of this more extensive cover increases substantially.

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Where can I get cover from?

Tax investigation insurance can be sourced from a number of different providers in the UK. Some of the more established companies offering this type of cover include AXA, Aviva, Hiscox and QBE.

Insurance brokers such as Marsh or JLT may also be able to provide quotes for bespoke policies tailored to your individual needs.

Alternatively, many banks and accountancy firms offer tax investigation insurance as part of an existing package of business services.

Get an online quote with Qdos

We have worked with leading insurer Qdos for over 15 years at Bytestart. They have provided cover for thousands of our visitors.

Qdos is a small business specialist and has successfully defended over 1,500 tax compliance cases. You can get an online quote here. Prices start at a mere £8.25 per month.

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