Does my business need tax investigation insurance?
Does my business need tax investigation insurance?
As a business, you may not have considered taking out a tax investigation insurance policy – but with HMRC ramping up the number of investigations they carry out, it might be time to think about putting some protection in place.
Late in 2022, the National Audit Office reported that HMRC carried out around 30% fewer tax investigations in the 2020-2021 period. Directly related to the Covid-19 pandemic, when staff were redistributed to cover the various financial support initiatives that were implemented during this time. This fall in investigations has cost HMRC an estimated £9 billion in lost tax revenue.
Can you avoid a tax investigation?
Unfortunately, any business in the UK is open to being investigated by HMRC at any time. There’s no forewarning, and while they can be triggered by substantial discrepancies in your tax returns, late filing or other notable misdemeanours, in reality, HMRC doesn’t need a specific reason.
If you’re approached for investigation, you’re legally obligated to comply, and they can take months (or even years) to complete.
With the intention to increase the number of tax investigations initiated this year, HMRC continued with their targeted approach of 2022, where they focused on a number of different sectors, including buy-to-let landlords. In January this year they launched a campaign appealing to ecommerce businesses and digital content creators, inviting them to make a disclosure for any undeclared income. Software developers have also come under fire from tax fraud allegations, and VAT is also a potential focus as investigations continue to rise.
What can you do to protect yourself from an HMRC investigation?
Even if your tax affairs are completely in order, the process of an HMRC tax investigation is complex and often time-consuming, so the additional work involved for your accountant isn’t usually included in their fees. By taking out a ‘tax fee protection’ policy, you’ll ensure that your business is completely covered in the event of an HMRC investigation.
Here at Parsons, we offer tax investigation insurance to all our clients, covering any incurred accountancy costs and all communications with HMRC on your behalf – feel free to learn more via the link, or drop us a line to discuss your needs.
Our Tax Fee Protection Service can protect your business from the costs and stress associated with an HMRC investigation. Make us your first line of defence – contact our team today.
