HMRC Fee Protection Insurance
What is Fee Protection Insurance and why do I need it?
At All Paul Accountants we understand that tax is a little word with big implications. That is why we work hard to give you the best possible advice and strategies to make tax altogether less taxing.
Any person or business that prepares a tax return, whatever the size, may be subject to a tax investigation by H M Revenue & Customs (HMRC). The very thought of an HMRC enquiry can be daunting but, in the event that you are chosen for investigation, we can help you at every step of the process.
Increasingly, HMRC is attempting to maximise the tax it collects by opening enquiries into specific aspects of a Tax Return and compliance checks, rather than full enquiries. With greater powers than ever, HMRC can turn the spotlight on your tax affairs at any time.
We can demonstrate to HMRC that you are paying the correct amount of tax and assist with the investigative procedures. The additional time and flexibility required means that tax enquiry charges are an unavoidable addition to our regular service fees.
To give you peace of mind we offer a tax enquiry Fee Protection service. The service is provided by Croner Taxwise, specialist providers of HMRC Protection Insurance schemes to accountancy practices. It is backed by an insurance policy under which we can claim the costs of defending clients in tax enquiries.
We will deal with any correspondence, checks or visits from HMRC and the potentially high costs of dealing with such enquiries will not be passed on to you.
As a client we strongly recommend that you take advantage of this service.
What are H M Revenue & Customs doing?
With the public finances so tightly stretched, HMRC has been set the ambitious target of increasing tax revenues. HMRC have responded strongly by:
Initiating a number of campaigns targeting taxpayers, whom HMRC believe have declared incorrect tax.
Launching a number of task forces, which target certain trades in specific areas.
Recruiting 2,500 new Compliance Officers.
Targeting 20,000 businesses for Business Record Checks each year.
Undertaking more enquiries and Compliance Visits than ever before.
Any taxpayer can be targeted by HMRC to check that they are paying the right amount of tax. Answering all of HMRC’s questions takes time and professional expertise. Enquiries often drag on for months and sometimes take years to conclude. It can cost thousands of pounds to defend you, whatever the end result. Even if you are found to owe no tax, you still have to pay the fees incurred in handling your case.
So what can be done?
It is more important now than it has ever been for you to consider protecting against the unplanned costs that you will incur in the event of an HMRC enquiry or compliance visit. This can be achieved at a relatively low cost.
Complimentary Employment Law and Health & Safety advice
As an added bonus, clients who subscribe to the service will also be able to obtain helpful advice about the complex areas of Employment Law, HR and Health & Safety law, at no additional cost. This is provided through The Peninsular Group.
Brochures to download
HMRC Claims Incident Rate
Types of HMRC Tax Investigations
A few real life examples of Fee Protection Insurance in use
Without fee protection insurance it would have been almost impossible to justify the professional fees involved in arguing some of the following cases with H M Revenue & Customs and subsequently at a Tax Tribunal
A small sole trader might have succumbed to paying a VAT penalty demand of £15,000 but for a few hours of quality professional’s time.
A client who owned rental property with an income of £25,000 was subjected to a tax enquiry by HMRC. HMRC issued several letters asking for further information and requested to meet with the client. The enquiry ran for 11 months with final professional fees exceeding £3,600; all of which were paid through the service.
A business was subject to a seven year tax enquiry, with professional costs of £49,500. HMRC was originally seeking £85,500 in tax, interest and penalties. This case was reluctantly settled for £4,500 purely to avoid the further significant expense of going to tribunal.
Mechanical engineer Neil Harris was sure he was right when HMRC challenged his VAT status. The case hinged on Neil’s choice of trade sector when he registered his company for the VAT flat rate scheme. None of the categories on the list supplied by HMRC seemed particularly relevant to his business; so, after taking advice, he registered under ‘Any other activity not listed elsewhere’, with a flat rate of 12%. HMRC decreed that he should have registered in the category ‘Architect, civil and structural engineer or surveyor’ with a flat rate of 14.5%. They demanded tax of £8,891 and a 35% penalty. Neil was looking at a payment of over £10,000.
HMRC claimed that when an individual sold his house for a second time within only a few years that he was trading …. and they wanted tax on his gain. The case was successfully defended and no tax payable. The gain was properly covered by the CGT Principal Private Residence Exemption.
A widow had to use her life savings to pay a tax demand after being hit by a shock tax demand for £5,000 after the death of her husband. The pension scheme had incorrectly given the widow the wrong tax code. The widow had never had dealings with HMRC and had no reason to believe anything was wrong, as every year she paid tax on her other pensions and income. But a few years later the widow was hit with a huge tax bill and revised calculations for the previous six years. HMRC demanded the money in full within four months. Under a tax concession known as ESC A19 the tax should have been written off as the taxpayer had done everything possible to pay the right tax.