This could be covered by insurance. This is why you should have insurance. Are you aware that a poor-defended Tax investigation can bankrupt you Are you sure this is not possible? ?
OK. Let’s move on to the answers. – That was another question!
Let me now answer these questions in reverse order…
First, don’t think that a thorough tax investigation is impossible for you. Any business, from a sole trader to a large multinational corporation, can be subject to a tax investigation. These investigations are used to police the current tax system. They can be initiated at random or brought to the attention of an Inspector. This could come from a malicious phone call or letter, or simply something that doesn’t fit in the annual forms with account information.
No matter how it begins, tax investigations will continue to be part of your daily life for at least two years. Don’t believe that you can’t have another one in the future. It doesn’t.
Second, don’t think you can avoid paying almost nothing for an undefended tax investigation. Because it’s easier for them find ways to increase your profits and adjust things, the Tax Office loves businesses that don’t have professional fee insurance. Although you can rely on your accountant for assistance, unless they are actively engaged in tax investigations, they will not know as much as you do about the subject but they will still charge you tax investigation fees.
The potential for bankruptcy can creep in when there is a settlement in undefended investigations. There will also be interest, and perhaps most importantly, penalties. The settlement amount will be paid within 30 days. If you are unable to pay the entire amount, you can rain a mortgage or another loan. However, bankruptcy may be an option for you if your assets can be sold.
Lastly, why would you need insurance coverage for this?
You can simply notify your insurers to let the appointed consultants handle everything if you had the foresight and insurance to cover this. These experts deal only with the Tax Office, and they don’t care if you aren’t happy. These experts usually settle investigations quickly and efficiently.
This professional fee insurance is a part of certain trade bodies like Federation of Small Business or British Institute of Innkeepers. You can purchase it from different insurance companies, and it even comes as part of some home contents or office policies. It is important to verify that you are covered.
You should join a trade organization such as the FSB or the BII if you’re looking for insurance coverage. Membership includes many other benefits such as legal help, 24 hour access and more. You will get insurance coverage at a comparable price each year, rather than just the policy.
Finally, if you are still not convinced that you need cover and are prepared to pay the accountants/consultants fees if, and when, it is needed… then be aware that the fees can range from about 3 years normal accounts fees as a minimum, up to exorbitant amounts if your case is complex and ends in court with barristers and other legal expenses!! If you have the recommended insurance coverage, it is free!
