Is Tax Investigation Insurance Worth It?
If you are thinking about whether or not tax investigation insurance is worth it, you may need to weigh the pros and cons of taking out this type of insurance. In this article, we will take a look at the key points to consider before making a decision regarding tax investigation insurance and evaluate its benefits against the costs involved.
Is Tax Investigation Insurance Worth It?
Whether or not tax investigation insurance is worth the price you pay for it will primarily depend on your circumstances and your personal understanding of tax-related matters. However, there are small businesses with simple tax matters that opt for tax investigation insurance simply to avoid heavy legal fees in the case of an HMRC investigation.
The pros and cons of taking out tax investigation insurance vary according to the type of coverage and services provided. On the pro side, those who are found guilty after an investigation may be able to recover the costs of their investigation and the associated reputational damage.
In addition to this, having tax investigation insurance can also provide peace of mind that your finances are protected and provide access to expert advice and assistance.
However, there are some downsides as well. Paying for tax investigation insurance can be expensive, and there is no guarantee that the insurer will be able to cover the whole cost of an investigation.
Other downsides include the fact that some policies may only cover certain types of investigations and that some providers may not have the necessary expertise to provide the best advice and assistance.
Finally, it is important to note that the insurance does not provide any protection against criminal investigations.
That said, one should keep in mind that an HMRC tax investigation can be a time-consuming and expensive process, so some businesses choose to take out tax investigation insurance as this insurance can help to cover the cost of an investigation and the associated legal fees.
Who Needs Tax Investigation Insurance?
Tax investigation insurance can be beneficial for businesses of all sizes. Small businesses, in particular, benefit from taking out tax investigation insurance as they are often not equipped to handle the financial costs and hassle associated with an HMRC investigation.
An investigation could be costly if the business is not aware of the regulations and fails to correctly pay the necessary taxes. The cost of paying for professional advice if the business cannot handle the investigation alone can also become expensive.
For businesses with a turnover of over £85,000, the cost of a tax investigation is always large as they are more likely to have been assessed for an incorrect amount of tax.
If you have a large business or a business where you deal with a lot of customer data, then it is especially important to consider the cost benefits of an investigation insurance policy. Without this insurance, the legal costs and fees associated with a tax investigation could cost many thousands of pounds.
How Much Does Tax Investigation Insurance Cost?
The cost of tax investigation insurance varies, depending on the size of the business and the risks involved. Generally, policies cost a minimum of £250 and can cost up to thousands of pounds a month.
It is important to compare the cost of policies from different providers as they have different pricing structures and coverage levels. You may find that the price you pay is dependent on factors such as the size of the business and the number of employees it has.
When calculating the cost of the insurance, it is important to be aware that some policies may not cover all possible tax investigations. For instance, some companies may not cover investigations into VAT, money laundering or corporate criminal offence investigations.
In addition to the primary cost of the insurance, businesses should factor in the cost of professional fees if they are required to represent the business during any tax investigation.
However, in comparison to the average tax enquiry costing anywhere between £4,000 to £5,000, a monthly insurance fee may prove to be a better option.
How Can You Get Tax Investigation Insurance?
Tax investigation insurance can be purchased from specialist brokers such as AXA, Aviva, Hiscox and QBE. Before taking out a policy, it is important to check that the company is reputable and has a proven track record in handling tax investigation insurance.
When taking out insurance, businesses should ensure that they are provided with the correct cover for the tax investigation activities they undertake. It is important to be aware that some policies may only cover certain types of activities and may not be suitable for businesses that are subject to complex investigations.
In addition to providing the correct coverage, businesses should check that the policy includes legal advice and other services such as accounting help, access to experts and an insurance broker’s support if their business is subject to an investigation. Insurance companies usually provide a detailed overview of their coverage and the services they offer.
All businesses should research the different tax investigation insurance policies and providers on the market in order to find the best value for money and the most suitable cover for their needs.
If you think you need tax investigation insurance, you can get an online quote as well.
Every UK business is required by law to pay taxes. This includes businesses of all sizes, from small businesses to large corporations. While paying taxes is a necessary part of doing business in the UK, it is also important to be aware of the possibility of an HMRC tax investigation and this is the reason why it may be advisable to consider a tax investigation insurance policy.