Is Tax Investigation Insurance Worth It?
Tax investigation insurance, which is sometimes also called tax fee protection insurance, is designed to cover the costs associated with professional representation in the event of a tax investigation by HM Revenue and Customs (HMRC).
The question is, is it worth it? Let’s take a look at how it works and what it offers so that you can make an informed decision.
Remember: 7% of HMRC tax investigations are selected at random
Should I take out tax investigation insurance?
Though not particularly expensive, we understand that you’ll want to know if tax investogation insurance is a justifiable cost for your business to pay each year. Whether this type of insurance is worth it depends on various factors and individual circumstances. Here are some considerations:
Likelihood of an investigation
Consider the nature of your business or personal financial affairs. Some industries or situations may be more prone to HMRC investigations. If you perceive a higher risk, insurance could be more valuable. However, HMRC does carry out investigations at random, so any business could be audited at any time.
Cost of professional representation
Tax investigations can be time-consuming and may require the services of a tax professional, such as an accountant or tax advisor. The cost of professional representation can be significant, and having insurance will help to cover these expenses.
Evaluate your financial position and ability to cover unexpected expenses. If the cost of professional representation in a tax investigation would be burdensome, having insurance can provide financial protection.
Complexity of your tax affairs
If your tax affairs are complex, involving multiple sources of income, investments or international transactions, the likelihood of an investigation might be higher. In such cases, insurance will be beneficial.
Peace of mind
Some individuals and businesses opt for tax investigation insurance simply for peace of mind. Knowing that you have coverage in case of an investigation can alleviate stress and uncertainty.
Quality of coverage
Before purchasing tax investigation insurance, carefully review the coverage terms and conditions. Ensure that the policy provides comprehensive coverage for a range of potential HMRC inquiries and that there are no significant exclusions.
Ask us for tailored advice
As your team of dedicated accountants, tax planning specialists and business advisors, we provide fully tailored advice in no-nonsense language. Our role is to help you understand your specific situation and provide guidance on whether tax investigation insurance is a sensible investment for you.
It may be that you decide tax investigation insurance isn't necessary, as some individuals and businesses prefer to set aside funds to cover potential investigation costs rather than paying for insurance each year. However, please note that a tax investigation case can prove expensive (usually costing a business thousands of pounds), so make sure to get in touch with our team for an in-depth chat about how it all works and how we can support you.
Contact us today to schedule a consultation
If you're looking to improve and grow your business in 2024, it's time to have a chat with our team of accountants, payroll managers, tax planning specialists, credit control agents and dedicated business advisors. To get started, call our Northern office on 01482 235575, our London office on 0207 885 0605, or fill in the contact form below.
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