Many accountants, myself included, offer an insurance-backed ‘HMRC Enquiry Fee Protection Service’ but many people do not understand what it is and whether they actually need it.
Basically, you are protecting yourself against the costs of having experts deal with a tax enquiry should you be unlucky enough to be pulled out of HMRC’s database. Currently, only around 2% of tax returns are subject to an enquiry so the chances of you being selected are quite small. However, if you are selected for an enquiry then HMRC are going to want to see some return for their money. In other words, they are likely to spend considerable time and resources looking for errors or inconsistencies in your records which will mean they can charge you more tax. Unfortunately the story does not end there. They are likely to extrapolate their findings and multiply those taxes back 6 years adding interest, penalties and surcharges along the way.
Appointing an expert tax adviser to defend you against such an attack can turn out to be very expensive which is why being part of a Fee Protection Service can be extremely beneficial. For example, our scheme covers up to £75,000 of professional fees in defending your case. This means we can dedicate a large amount of resources, bringing in specialist consultants if necessary, to defend your position.
Some people are of course more averse to risk than others and you may never face an enquiry in your life. However, with Fee Protection Services starting at £40 per annum for individuals and £100 per annum for limited companies (including all directors and their spouses) the cost of being able to sleep at night is certainly affordable.
