Forum

• # 54173
• Tue 01 Feb 2011 02:51 PM

Hello All,

Can anyone advise on Tax Investigation Insurance Policies?  I have heard and read a little on these being taken out potentially by clients to insure them against investigation and having to call upon your services.  Can anyone advise if they are worth it? Who does it?  Is there anything for the reversal of this situation?

Cheers

Rachael

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• # 54178
• Tue 01 Feb 2011 06:56 PM

Hi Rachel

The CA I worked for used to encourage his clients to buy a policy, simply because during a tax investigation the HMRC can go back several years and really a qualified accountant should be on hand to answer anything that the business owner himself doesn't understand and can't explain.

The policies used to cover the cost of the accountants fees which in some cases I saw running into thousands of pounds and this is regardless of whether or not the HMRC find anything wrong.

My own thoughts are that if the bookkeeper and accountant have been in place since day one of the business there arent any real issues and the time isnt as onerous but if they were introduced a few years into the accounts period things can be in a right old muddle.

Another issue is of course the decision (taken quite a while ago) by the HMRC to run a bit of a lottery - in other words if your number comes up you will be investigated, so it is no longer based on whether you paid your tax on time you'd be safe etc.

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• # 54179
• Tue 01 Feb 2011 08:26 PM

Thank you Liz,

I think I need to find out a little more from someone who offers the insurance.  When working as PAYE I was involved with a VAT inspection so know how painful in time and effort it can be.  I know someone else who does pay about £90 p/yr for the cover but not sure who yet. 

I know you mentioned accountants being involved but as I practise for sole traders who don't need an accountant then I would be the contact so now wondering if covers bookkeepers or if the terminology covers different professional people accountant or bookkeeper?  For some of my sole traders the cost with cover if unluckily picked could be too much of an expense.  As this year from mid 2011 I think the announcement was, HMRC are apprently looking to concentrate on small business and inspecting records for accuracy etc.  So I am looking to support my clients as much as possible even if that is simply to suggest a cover which is their choice, their decision as to whether to bother.  Everyone has their own thoughts on insurance and whether to risk it but if I have mentioned it as a suggestion then 'if unlucky' they at least knew of it !!

So if anyone knows of any companies offering it that I can research that would be great!  I did hear that some accountants make commission on selling it too.  Any interesting results I shall post back on this conversation.

Thanks again and in advance of any further thoughts.

Rachael 

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• # 54180
• Tue 01 Feb 2011 08:52 PM

Hi Rachel.

Speak to the ICB or indeed contact trafalgar directly as I believe they offer ivestigation insurance which should cover all time costs for those professionals involved in the investigation.

You need to be careful of the terminiology used as there is a world of difference between a VAT inspection and a VAT investigation.

HMRC are also under VFM constraints which means that they must offer value for money and therefore need to reasonably justify the time spent against additional tax recovered. If they suspect there is some kind of fraud taking place they will of course delve deeper in order to assure themselves that no wrong doing has taken place.

You will probably find they HMRC will concentrate on certain sectors such as hairdressing and retail where cash changes hands and therfore there is more scope for aviodance.

HMRC will in the first sweep go for those people not using professional bookkeepers and accountants as we will be deemed to be accurate and up to date with our knowledge on the basis the institute requires it.

any more thoughts welcome

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