Why everyone should have Fee Protection insurance

HMRC raised £24 billion in extra tax last year from what they call “compliance revenues” – this means tax that they have generated over and above what has been declared by taxpayers.

About half of this came from large corporations and the defeat of marketed tax avoidance schemes, but the rest will have come from general compliance activity targeted at smaller businesses and individuals who have not been involved in avoidance or evasion. Indeed, figures quoted in a recent Daily Telegraph article suggest that HMRC opened enquiries into the affairs of 237,215 people last year as compared to 119,000 in 2011/12. According to the newspaper the number of enquiries into self-employed individuals quadrupled in that time.

This undoubtedly reflects what we have been seeing as accountants, with HMRC activity driving a significant increase in the number of enquiries raised. The majority of the increase is coming from what we refer to as ‘simple’ aspect enquiries into specific expense headings within business accounts or into understated bank interest, rental income or capital gains on personal tax returns. The latter are often raised under the “discovery” rules which allow HMRC to commence enquiries outside the normal time limits. This means that often quite a lot of time and effort is expended over very small amounts of potential tax sometime from several years ago, but this does not seem to deter HMRC.

Against this backdrop Tax Fee Protection Insurance has never been so valuable. For more information, please call us on 01749 677989.