Tax: ease the stress of an enquiry

The FSB reported that 10% more SMEs faced a tax inspection within the last year. Further exacerbating the situation for business owners is the fact that HM Revenue & Customs has greater powers to inspect companies at shorter notice following the last Finance Act.

Businesses recognise the importance of having a good accountant or financial adviser, who will ensure the company adheres to stringent accountancy rules and regulations, but there is still no certainty that a business will not be investigated.

Having additional protection can provide reassurance for the business owner should they find their company under investigation.

Under the commercial legal protection section within a business insurance policy, businesses can find shelter. It may not seem the most obvious cover for a business to have and it isn’t compulsory, but it can help to financially protect a firm in a tax inspection. The support provided can reduce costs otherwise incurred and cut the emotional stress of the inspection.

In the event of a full enquiry or aspect enquiry, for example where HMRC is investigating a specific element of the business’s accounts - such as employee bonuses, tax returns or national insurance contributions - having commercial legal protection will mean the insurance provider will either appoint an accountant to act on the business’s behalf or use the policyholder’s existing adviser. The level of protection provided by the cover will typically include the cost of the expert’s time spent negotiating with HMRC throughout the dispute. It will also cover VAT disputes and employer’s compliance. Cover does vary between providers so it is worth checking what cover is available.

With recent research highlighting that business owners find tax inspections disruptive, a constant worry, make it difficult for them to focus on running their company and more stressful than moving house or even starting the business, any measures they can take to reduce the stress of being investigated is of benefit.

Chris Little is managing director of Premierline Direct