If you’ve ever received that dreaded letter through the door, you’ll know that a tax investigation is costly in at least two ways:
Possible discovery of underpaid tax, tax penalties and interest
Accountancy fees for the time spent defending your case
Whilst you can’t insure against HMRC penalties or what they might discover to be unpaid tax, you can protect yourself against your accountants’ time in defending your case, ensuring that the final cost of tax and penalties is as low as possible.
How can you get protected?
There are many companies offering Tax Investigation Insurance; but our recommendation is to consider joining the Federation of Small Businesses at: https://www.fsb.org.uk/
Membership of the FSB includes Tax Investigation Protection plus a host of other Member Benefits.
Who should get protected?
Keep in mind that if your business becomes subject to a tax investigation, we will invoice you, the client, for our time in defending your case. We are not insured to cover the costs of this additional service.
We encourage all clients to consider joining the FSB - especially if any of those additional Member Benefits appears helpful to you.
That said, it's not unreasonable for small sole-traders to operate without Tax Investigation Protection. In most cases tax investigations are infrequent and resolved reasonable quickly and inexpensively.
The case for Tax Investigation Protection becomes more compelling if your business is registered for multiple taxes (e.g. Income Tax, PAYE (payroll), VAT, Corporation Tax etc). As such, we highly recommend that our limited company client's with employees join the FSB.
Would you like help to pay less tax? Feel free to get in touch or check out our related posts 👇