Frequently Asked Questions

Have any questions about tax enquiries? Here are the answers to some of the more frequently asked questions.

Frequently Asked Questions

Most tax enquiries are generated by computer "risk profiling" and many are selected completely at random. As a result, HMRC sometimes picks the wrong targets. Even if you have done nothing wrong, the taxman will not give up and will still try hard to find errors.

Anyone who submits a tax return can come under scrutiny. Every year, HMRC start enquiries into many thousands of personal and business tax returns and accounts. VAT and PAYE payments are also thoroughly checked. The aim in every case is to collect more tax. HMRC has raised an extra £9 billion over the last three years and in 2012/13 the number of tax investigations increased from 119,000 to over 237,000 – in just one year.

Not paying the annual cost could be a false economy. The potentially high costs of defending you in an enquiry would be much less affordable than the small annual charge. One thing is certain – HMRC does not stop making enquiries into tax returns when there is an economic downturn. The amount of debt the government is in at present is only likely to increase the potential threat of an investigation.

Like any other protection to meet an unexpected cost, everyone hopes that they don't need it but when a costly enquiry starts, clients are glad that they've paid the small annual charge.

Such cover will normally be limited and not as wide ranging as the practice service. Such policies may not pay our fees to look after you and may instead bring in an outside consultant who doesn't know you.

The questions asked by HMRC are usually very detailed and time-consuming to answer. The costs of defending you can easily run into thousands of pounds, even if little or no extra tax is paid at the end of the enquiry. These costs are not protected by the normal annual fees paid to us.

You can subscribe to our Tax Investigation Service which will protect you for the work and costs of defending you in the event of a tax enquiry by HMRC.

It is a Service set up by us in conjunction with Professional Fee Protection (PFP) to protect clients who suffer a tax enquiry. For a small annual fee, you can join our Service and obtain the benefits described on the Service Summary. The Service is backed by an insurance policy that the practice has arranged through Professional Fee Protection. When you subscribe to our service we are able to make a claim against our insurance policy held with PFP in respect of our fees incurred.

  • We will defend you, if and when you are selected for a tax enquiry by HMRC
  • The potentially high costs of professional fees for that defence will be claimed under the practices' insurance policy
  • It will not be necessary to accept unreasonable tax charges by HMRC due to concerns about professional fees
  • You will also get free access to a 24/7 business legal helpline

Under the Service, subscribing clients will be fully protected and the practice will claim under our own insurance policy for up to £100,000 of professional costs, in the following circumstances:

  • A HMRC enquiry into a personal or business tax return
  • A HMRC enquiry into any business accounts, including those of sole traders, partnerships and limited  companies
  • A dispute with the HMRC where additional VAT is being pursued
  • A dispute with the HMRC where additional PAYE tax or National Insurance Contributions is being pursued
  • A dispute with HMRC relating to the tax status of employees or subcontractors

To ensure seamless protection, the business fee protects enquiries into the tax returns of the directors, partners, and their spouse and company secretaries providing we prepare their tax returns. However, where the individual has self-employment income (outside of the main business) and/or gross rentals received as landlords that total £50,000 each or more per annum, then a separate Business Client fee is payable.

Some costs will not be protected under the Service, including the following:

  • Outstanding taxes, penalties, interest or any other amounts due to HMRC
  • Defence of clients in criminal prosecution cases or serious fraud enquiries
  • Fees relating to pre-existing tax enquiries, or enquiries where tax returns were submitted to HMRC later than the statutory time limits (90 days).
  • Tax avoidance schemes

To subscribe to the Service, a cheque for the amount due should be sent to us unless otherwise stated. If you need any more information, we can provide this by email or post.

PFP are specialist providers of Tax Enquiry Insurance. They pioneered fee protection in the UK for nearly 30 years. They have protected over 100,000 different businesses and individuals. Their fee protection scheme is backed by the worldwide AXA Insurance group. They are committed to working in conjunction with us, thus ensuring your interests are fully protected.

For more information download our Tax Investigation Service brochure. To speak to an adviser fill in our quick enquiry form or T:+44(0) 151 647 6681.

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