Many of our clients ask us about fee protection insurance, they want to know what it is, the benefits and how it works. So, we’re going to cover it all.
HMRC conduct Tax Compliance Checks every year, to make sure businesses are paying the right amount of tax.
They can be conducted on a completely random basis, which means anyone could be subject to one, but they can also be triggered by noncompliance and certain changes within your company.
If you or your business is selected for a tax enquiry or compliance check, there’s a large amount of additional work for your accountant to do.
This is where fee protection insurance comes in handy!
What is fee protection insurance?
To put it simply, it’s a one-off fee that you can pay, which protects you in the event you’re subject to a tax enquiry or compliance check.
Why would I need it?
Increased checks
HMRC are actively increasing Inspectorate headcount alongside more stringent financial (tax collection) targets. This is already resulting in more inspections and enquires than we were seeing 12 months ago.
HMRC are focusing their attention on two key areas that may impact you:
- Scrutiny of more R&D tax credit claims, particularly in the light of some rule-tightening and the aggressive behaviour of numerous ‘boutique’ R&D specialists.
- Review of Coronavirus support claims, via the Coronavirus Job Retention Scheme (CJRS) or one of the loan schemes.
Save money
As we said above, if HMRC notifies you that you’re subject to a tax compliance check, it’s extra work for your accountant and investigations can be timely.
HMRC may ask for months’ worth of statements, calculations, PAYE records and returns. They may go back and forth with your accountant, asking for further clarification and evidence.
An investigation will start by looking over your last year’s tax return. If there’s been an error, they could go back as far as 4 years to check for further inconsistencies.
If the mistake was due to negligence, they may look at your returns from the last 6 years. If they suspect foul play, they have the power to go back 20 years. Regardless of how far back the investigation goes, you’ll be billed at an hourly rate by your accountant for the additional work and the hours can quickly add up!
Peace of mind
Once you’ve paid for cover, you don’t need to worry about the implications of a random check. You know your accountant will cover it for you and it won’t result in extra costs. Meaning you can sleep better at night.
Do Blu Sky offer a fee protection service?
Yes we do! We do a 12-month policy with a one-off payment that works out cheaper than two hours of our work.
If you’d like to find out more about the service, or think you’d benefit from it, get in touch!
