Did you know you could get insurance cover for this? Do you know why you need insurance cover for this? Do you know that a poorly defended Tax investigation could bankrupt you? Do you think this could never happen to you??
OK. Enough questions, what about the answers? - Oops, that was another question!
Let me answer the questions in reverse order...
Firstly, if you think a detailed in-depth tax investigation could not happen to you - WRONG. It can happen to any business from the smallest sole trader to the largest global company. The current tax regime is policed by these investigations, either started at random, or as a result of something coming to an Inspectors attention. This could be from a malicious letter or phone call, or something that just doesn't stack in the forms that are submitted each year with accounts information on.
However it starts, a tax investigation will be a part of your life for up to two years. And don't think that having one now will prevent you having another in the near future either. It doesn't.
Secondly, if you think you can get away with paying next to nothing as a result of an undefended tax investigation, think again. The Tax Office love businesses without professional fee insurance because it is much easier for them to find things to adjust and increase your profits. You may rely on your accountant to help you out but unless they are constantly engaging in tax investigations, they know as much about how to tackle it as you will, but will still charge tax investigation level fees to you anyway.
Where does the possibility of bankruptcy creep in... the settlement in an undefended investigation can be massive. Then there will be interest and most importantly, penalties. You then get 30 days to come up with the full amount of the settlement by raining a mortgage or other loan, but if you cannot do this perhaps because of a poor credit rating, then bankruptcy is a quick option for the government if you have some assets they can sell.
Finally, why do you need insurance cover for this?
If you have had the foresight to make sure you have insurance for this, then when the letter from the tax Office arrives, you simply notify the insurers and let the appointed consultants deal with everything for you. These experts do nothing else but deal with the Tax Office and don't give an inch in any respect in their dealings on your behalf. Settlements in investigations defended by these experts are usually minimal and manageable.
This type of professional fee insurance is an integral part of membership of some trade bodies such as Federation of Small Business and British Institute of Innkeepers, you can buy it from various insurance companies and it is even part of some home contents and office policies. The thing to do is check that you are covered by someone.
If you are looking for cover, you should consider joining a trade body such as the FSB and the BII as membership includes lots of other benefits as well as the insurance cover such as 24hr legal help lines etc. rather than just the insurance cover for a similar price per year.
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!! Or FREE if you have the recommended insurance cover!
Ray Stewart is the MD of Coalville Business Services Limited. He writes articles and reports about bookkeeping and business growth strategies, the two areas of business he is most passionate about. His bookkeeping business website is at http://expertbookkeeping.info and is a free resource for people looking for simple answers to bookkeeping questions and a chance to speak to him for free if you can't find the answer you are looking for. You can also visit his private blog at http://raystewart.biz and subscribe to the RSS feed there to keep right up to date. |
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