What are the benefits of tax investigation insurance?

Blogs 23 Aug 2021

Find out why it pays to be protected if HMRC starts a tax enquiry into your business and discover the comprehensive cover available to FSB members at no extra cost.

Whether you’re a sole trader, contractor or running a limited company, a letter from HMRC through your letterbox can fill you with dread. HMRC enquiries look at several different areas of tax, such as VAT, PAYE compliance or IR35 investigations. There have also been reports of investigations into Coronavirus Job Retention Scheme claims, branded by the media as furlough fraud investigations.  

Our tax experts from FSB Legal Protection Scheme explain how tax investigation insurance can save you time and money as a small business owner.  

How can tax investigation insurance help my small business? 

If HMRC decides to open an investigation into your business’ finances, there are many reasons why having insurance in place is invaluable, including costs, time and expertise.   

1. Save on costs 

According to Markel Tax, the average tax enquiry can cost small businesses between £4,000 and £5,000, but each case is unique and costs can vary. 

Even if you’re compliant and do everything by the books, defence costs during a tax investigation can spiral into the thousands. From representation costs to accountant fees, it can quickly add up, especially during a lengthy enquiry.

That’s why tax investigation insurance is a key part of FSB membership, so you can protect your business’ bottom line. If work is required of your accountant, their fees will be paid subject to them being agreed in advance. 

2. Expertise on your side 

Having an experienced tax specialist you can rely on gives you peace of mind during an enquiry. You’ll have representation from a former tax inspector who is familiar with HMRC, knows what to look out for, and can offer advice and guidance every step of the way.  
Our team of experts can represent you in: 

  • Corporation or Income Tax full and aspect enquiries 
  • PAYE (Employer Compliance) and VAT enquiries arising following an HMRC visit to examine business records 
  • IR35 enquiries/disputes 

3. Save valuable time 

HMRC enquiries can take years to complete and dealing with correspondence takes away precious time that you could be spending on running your business. How long the investigation may take depends on various factors, such as how much information HMRC is looking through, the area of taxation under question and the size of your business. 

Full enquiries can last around 16 months on average, whereas aspect enquiries usually last between three and six months. However, it can take much longer in cases where more complex matters are under review and where disputed valuations arise. A tax consultant will meet with you and the Inspector as necessary, deal with all correspondence arising and liaise with your accountant. 

"I have been a member for four years and FSB recently helped me with a tax investigation claim which was successful and saved me a lot of time and money. Just when I thought the investigation was concluded, HMRC said they were going to investigate my private affairs. My first thought was that I wouldn't be covered for that as well. However, I was told that if there is an investigation into the business that then leads on to my private affairs, then that would also be covered. To my relief, FSB supported me through it and I can now continue to run my business without the worry of a further visit from HMRC." 

4. Reassurance 

You won’t need to stress or worry at the prospect of a tax enquiry – simply pick up the phone straight away and know you’ve got a specialist on your side from day one. 

When Josh Harbias, an FSB member for over a decade, received a request for information from HMRC, he found it reassuring that the tax experts at FSB Tax Investigation Protection were in his corner. 

“FSB’s tax experts took it off my hands and dealt with all the heavy lifting. It was reassuring to know someone was in my corner. They had the time, knowledge, skills and understanding of HMRC, which was great, especially when business owners like me are not used to the process. The enquiry lasted five years and without FSB’s help it would have cost thousands of pounds to deal with.” 

Read more about Josh Harbias’ experience. 

What extra protection is available for FSB members? 

With essential tax advice, protection against the cost of professional fees and representation from ex-HMRC inspectors in the event of a tax enquiry, you can protect your business for less. There are no extra fees or policies to take out – tax investigation insurance is part of your membership. 


Legal expenses insurance that doesn’t break the bank

Protect your business against the unexpected. FSB Legal Protection Scheme is designed just for small businesses and is backed by 24/7 legal advice, expert tax guidance and online support - all at no extra cost.