Why You Need Insurance For Professional Fees In A Tax/VAT Investigation!

Ray Stewart General, Tax Matters, VAT Leave a Comment

Did you know you could get insurance cover for this?  Do you know why you need insurance cover for this?  Do you know that a poorly defended Tax investigation could bankrupt you?  Do you think this could never happen to you??

OK.  Enough questions, what about the answers?  – Oops, that was another question!

Let me answer the questions in reverse order…

Firstly, if you think a detailed in-depth tax investigation could not happen to you – WRONG.  It can happen to any business from the smallest sole trader to the largest global company.  The current tax regime is policed by these investigations, either started at random, or as a result of something coming to an Inspectors attention.  This could be from a malicious letter or phone call, or something that just doesn’t stack in the forms that are submitted each year with accounts information on.

However it starts, a tax investigation will be a part of your life for up to two years.  And don’t think that having one now will prevent you having another in the near future either.  It doesn’t. 

Secondly, if you think you can get away with paying next to nothing as a result of an undefended tax investigation, think again.  The Tax Office love businesses without professional fee insurance because it is much easier for them to find things to adjust and increase your profits.  You may rely on your accountant to help you out but unless they are constantly engaging in tax investigations, they know as much about how to tackle it as you will, but will still charge tax investigation level fees to you anyway.

Where does the possibility of bankruptcy creep in… the settlement in an undefended investigation can be massive.  Then there will be interest and most importantly, penalties.  You then get 30 days to come up with the full amount of the settlement by raining a mortgage or other loan, but if you cannot do this perhaps because of a poor credit rating, then bankruptcy is a quick option for the government if you have some assets they can sell.

Finally, why do you need insurance cover for this?

If you have had the foresight to make sure you have insurance for this, then when the letter from the tax Office arrives, you simply notify the insurers and let the appointed consultants deal with everything for you.  These experts do nothing else but deal with the Tax Office and don’t give an inch in any respect in their dealings on your behalf.  Settlements in investigations defended by these experts are usually minimal and manageable.

This type of professional fee insurance is an integral part of membership of some trade bodies such as Federation of Small Business and British Institute of Innkeepers, you can buy it from various insurance companies and it is even part of some home contents and office policies.  The thing to do is check that you are covered by someone.

If you are looking for cover, you should consider joining a trade body such as the FSB and the BII as membership includes lots of other benefits as well as the insurance cover such as 24hr legal help lines etc. rather than just the insurance cover for a similar price per year.

Finally, if you are still not convinced that you need cover and are prepared to pay the accountants/consultants fees if, and when, it is needed… then be aware that the fees can range from about 3 years normal accounts fees as a minimum, up to exorbitant amounts if your case is complex and ends in court with barristers and other legal expenses!!  Or FREE if you have the recommended insurance cover.

~Ray

Ray Stewart
I am a qualified Certified Practising Accountant having passed my final exams way back in 1981. I actually can’t believe that was 37 years ago!! Anyway, I am now in my 60’s and I have been running my own business since May 1983. And before you ask, no, I have never regretted a moment of it! Part of the membership requirements of my professional body now dictate that I spend quite a lot of time on “CPD” - continuing professional education (one of their better ideas) - and over the last two years I decided to study business growth and marketing. I have learnt such a lot and that knowledge has radically changed my old “accountants” approach to business. It has made such a difference to the way I work and operate I feel that I just have to pass on this knowledge. It is simply too powerful to hold back!! - but I will try and do it in simple terms rather than expecting you to spend hours, as I had to, working through the difficult language that trainers seem to use to pass on their concepts. I hope you find the blog a useful resource and interesting place to visit as the months pass. I will do my best to keep up the flow - but if there are any topics you would like me to cover, then please let me know. Ray Stewart
Ray Stewart
Ray Stewart

Latest posts by Ray Stewart (see all)

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.