Protect your business from the taxman with legal cover

As one of our most popular articles we have updated this for 2016.

Small businesses across the country have been subject to a new wave of action from the taxman. From spot checks to tax ‘amnesties’, HM Revenue and Customs has been using a range of new tactics to ensure that businesses are paying the right amount.

This poses problems for business owners. Even if you have paid your tax properly, an investigation by the Revenue can be expensive – and appealing against HMRC decisions can be a long and costly process. So what is the Revenue doing, and how can you protect your business?

What is the taxman doing?

In an attempt to recover some of the revenue lost through tax evasion, HM Revenue and Customs has begun a series of crackdowns on specific professions. It has identified areas in which it thinks evasion is particularly rife, or in which it thinks it can make some ‘easy wins’.

The crackdowns have been preceded by so-called ‘tax amnesties’. The Plumbers Tax Safe Plan, for example, gave plumbers the opportunity to fully declare their income and take more lenient fines. Those who chose not to take advantage of the amnesty were warned that they would face stiffer penalties in the event that they were found to have been making incorrect declarations.

As previously reported, HMRC has now begun its post-amnesty crackdowns, with hundreds of plumbers facing investigation – and a handful facing criminal prosecution.

But it’s not just plumbers who are in the firing line. Business owners in every sector need to be aware of the risks of a tax investigation – and they need to take steps to minimise that risk.

How can I protect my business?

Complete and accurate recordkeeping is the first and most important way in which you can protect your business. As well as being a legal responsibility of business owners, adequate recordkeeping is vital if you are to ensure that you are declaring and paying the right amount of tax.

You may wish to consider investing in bookkeeping software to help you keep track of your accounts. There is a range of software available, much of which is very cheap and very easy to use. Good bookkeeping packages will automatically generate the right numbers for your annual returns – provided, of course, that you put in the right data to begin with.

You should also make absolutely sure that you understand your tax responsibilities. Ignorance of the law is not a defence in the event of a tax investigation, so it is vitally important that you are up to speed. Speak to a qualified accountant or tax advisor if you are in any doubt.

How can insurance help me?

Many business owners also choose to take out legal expenses insurance in order to cover themselves against some of the potential costs associated with a tax investigation.

This type of insurance can cover the costs of defending HMRC actions including investigations into PAYE, VAT, and Self Assessment. It may also pay out in the event that you choose to appeal against an HMRC decision in the local courts system.

Crucially, good tax protection cover will also provide you with access to a legal and tax advice helpline whenever you need it – not just when problems arise.

It is important to understand, though, that insurance of this type also relies on you being a conscientious taxpayer. In order for your cover to be valid you must complete and submit the relevant returns properly, and on time. You should also understand that tax protection will not cover any underpaid tax, penalties, fines, or interest. Instead, it is there to help you deal with the costs of an investigation.

Legal cover is available as part of your business insurance policy. Get quick quotes now.

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