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Tax Investigation Insurance

Having a Solar Protect Tax Investigation Insurance policy at your disposal means that should you be one of the many 1000's of businesses or individuals that are selected by HMRC each year to look into your tax affairs your own accountant 
(your tax return agent) can get on and defend you robustly. You have the peace of mind knowing that your accountants (your tax return agent) fees will be paid by the insurance without any Excess for you to find.

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Useful Information

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What is a Solar Protect Tax Investigation Insurance Policy?

It is an insurance policy that will fully reimburse your accountants (your tax return agent) fees up to £100,000 if you are subject to enquiry by or dispute with HMRC.
A  policy will enable your Accountant (your tax return agent) to:
  • Deal with any correspondence from HMRC
  • Attend any meeting with HMRC
  • Appeal to the First-tier Tribunal or Upper Tribunal
  • Having the security of knowing that fees will be met in full will enable your Accountant (your tax return agent) to defend your position robustly
  • Premiums are Annual Premiums.
  • Premiums are inclusive of 12% IPT.
  • Premiums and IPT are due in full in advance / at commencement of policy.
  • There is a NIL excess on all policies.
  • Our cancellation terms are pro rata returns if policy not required mid term (assuming no claim on policy)

What powers do HM Revenue and Customs now have?

As of April 2009 HMRC have been able to visit business premises to inspect records covering all taxes including corporate, income, PAYE, NI, Capital Gains and VAT. They can now also issue written queries before you have even submitted your annual returns.This is a power they are now implementing more often.

Main Exclusions

  • Pre existing enquiries or disputes
  • The defence of criminal prosecutions
  • Investigations carried out by the Serious Civil Investigations Office
  • Investigations carried out under section 60 of the VAT act 1994
  • Costs incurred without Insurers consent

What is covered by the policy?

The cover provides representation costs incurred by your Accountant (your tax return agent), for up to £100,000 in any one claim, arising from:
  • Income Tax Self Assessment aspect and or full enquiries*
  • Corporation Tax Self Assessment aspect and or full enquiries
  • H M Revenue & Customs VAT disputes
  • Employer compliance disputes PAYE/ P11D/ NIC
  • IR35 disputes
  • Now covers business's with an annual turnover of up to £10 million
  • Fees incurred by your accountant (your tax return agent) attending meetings with H M Revenue & Customs (HMRC) or responding to correspondence from HMRC when you are subject to an HMRC check, enquiry, visit, meeting or dispute.
  • Includes professional fees incurred in respect of local review of the enquiry and preparation and representation at an appeal to a First-tier Tribunal or Upper Tribunal.
  • Cover is included for directors/partners personal returns and also applies even if you have income that does not generate from the business, there are some limitations to this income so please call for full details.

I have done nothing wrong, why should I worry?

Why should I worry about a tax enquiry?
Most enquiries are generated by computer "risk profiling" and many are selected completely at random.
As a result, HMRC sometimes picks the wrong target. Even if you have done nothing wrong, the taxman will not give in and still try hard to find errors.

HMRC Enquiries Explained

When HMRC may make an enquiry into your Tax Return
When you file your Tax Return, you are telling HMRC how much Tax your organisation is due to pay. This is known to HMRC as your organisation's 'self assessment'. 
Sometimes HMRC may want to ask questions about the figures in your Tax Return form or in supporting documents such as supplementary pages, accounts and calculations. HMRC calls this kind of compliance check 'making an enquiry'
Before HMRC can make an enquiry, they must advise your organisation, in writing, that they intend to do so. HMRC calls this 'opening an enquiry'.
When HMRC opens an enquiry this doesn't necessarily mean your organisation has done anything wrong. Sometimes HMRC just needs more information to understand your figures.
What an HMRC enquiry can cover
HMRC can make an enquiry into your organisations:
• Tax Return - including accounts, tax computations and other supporting documents and calculations 
• claims or elections you make separately from your return
• amendments you make to your return, claim or election
HMRC starts the enquiry process by sending you a written 'notice of enquiry'. A notice of enquiry only allows HMRC to ask questions about your organisation's Tax Return, claim or election. If HMRC wants to ask questions about your personal tax position as a director, shareholder, member or trustee, they must make a separate enquiry.
HMRC can only make one enquiry into a particular Tax Return. But if you make an amendment to your return, HMRC can then make an enquiry into that amendment too. 
During a review of your Tax Return, other tax risks may come to light – for example with your VAT or PAYE responsibilities. Generally, if this happens, the HMRC Officer dealing with the review will co-ordinate any further enquiries, within the HMRC compliance checks process.
What happens when HMRC makes an enquiry
At the start of an enquiry
When HMRC sends a notice of enquiry to you, you - and your Tax agent if you've got one - will be told whether HMRC is making an enquiry into:
• the whole of your Tax Return - including y accounts, tax computations and other supporting documents
• one or more specific areas or aspects of your return
• a claim or election you've made separately from your return
At the same time HMRC will tell you:
• what information is needed
• the deadline for providing this information
• your company or organisation's rights and responsibilities
What information HMRC can request from your organisation
The information your organisation will need to supply during a compliance check will depend on what HMRC is enquiring into. 
But HMRC can only ask you to provide information or documents that they need to check your organisation's Tax position.
Your tax adviser should normally be able to provide any information on which your Tax Return was based.
Possible outcomes of an HMRC enquiry
At the end of the enquiry, HMRC will normally send you a letter (called a closure notice) to tell you that the enquiry has finished. What happens then depends on whether the enquiry showed that:
• nothing is wrong
• your organisation has paid too much Tax 
• your organisation hasn't paid enough Tax
If nothing is wrong
If there's nothing wrong with your Tax Return or claim, HMRC will tell you that the enquiry is over. In this case there won't be any changes to your return or claim or the amount of Tax you need to pay.
If you've paid too much Tax, from 1 April 2010, if HMRC's enquiry shows that your organisation has paid too much Tax, HMRC will:
• amend your Tax Return to reflect the lower figures 
• repay the overpaid Tax to you 
• pay interest on the overpayment - HMRC will normally pay your interest on the overpaid tax from the date you paid your Tax (or the normal due date for payment if later) up to the day HMRC makes the repayment
If you've paid too little Tax
If your organisation has paid too little Tax, HMRC will try to agree with you the changes and amendments needed. 
From 1 April 2010, HMRC will amend your Tax Return and ask you to pay any Tax due within 30 days of the date on your closure notice. You can appeal HMRC’s amendment.
HMRC checks before you make your return
HMRC may need to check something with you before you submit your return. This may happen for example when they're following up a previous compliance check to ensure that your recordkeeping system has improved or to check the conditions set when a penalty was suspended. 
This type of check is known as a 'pre-return' check. Unless you ask them to check something, HMRC must have identified a risk before they can carry out a pre-return check. This means they must think there's a potential loss of tax at stake.
A Taxwise+ Policy from Solar will allow your Accountant (your tax return agent) (Tax Advisor) to defend your position robustly and claim their fees from the policy and not from you. Your accountant (your tax return agent) can get on with the work (after processing a claim) knowing that their fees will be met in full.

Which policy do I need?

Your Tax circumstances will place you in one of eight categories from a private policy at the lower end to a Limited Company or Partnership with turnover between £150,000 and £10,000,000 at the upper end. (if you turnover in excess of £10M just call us direct for a quote)

Which category do you fall into from the following:
Individual Self Assessment
Sole Trader with a turnover of less than £85,000 per annum and not registered for VAT
Sole Trader with a turnover of less than £250,000 per annum and not registered for VAT
Sole Trader with a turnover of less than £250.000 per annum and registered for VAT
Sole Trader with a turnover of more than £250,000 but less than £10 million
Ltd/Partnership with a turnover of less than £150,000 not registered for VAT
Ltd/Partnership with a turnover of less than £150,000 registered for VAT
Ltd/Partnership with a turnover of more than £150,000 but less than £10 million
Once you have selected your correct status all you need to do now is select your possible accountants (your tax return agent) hourly charge out rate.
(please see our guidance to this under 'Accountants hourly rates explained'

Accountants hourly rates explained

Our policies protect 3 different options for an Accountants (your tax return agent) hourly rate
• Upto £150 per hour (option 1)
• £151 - £200 per hour (option 2)
• £201 - £300 per hour (option 3)
If you know that your Accountant (your tax return agent) charges £175 per hour then you should select option 2, if they charge £250 then you should select option 3
If your accountant (your tax return agent) charges £325 per hour you have two options
You can take out option 3. The policy will pay the first three hundred pounds per hour of a claim and you can pay the difference direct to your accountant (your tax return agent) or you can call us direct for a quote to cover the whole £325 per hour
We appreciate that many accountants (your tax return agent) charge a relationship fee to look after your affairs and as such do not ‘publish’ an hourly rate. The majority of our policies are issued at option 1, so will cover upto £150 per hour. If your accountant (your tax return agent) at the point of enquiry tells you the rate will be £175 the shortfall can be made by you. Cover will not be excluded because the hourly rate selected is too low

Can anyones tax affairs be scrutinised by HMRC?

Anyone that pays tax can come under scrutiny. Every year, HMRC opens enquiries into thousands of personal and business tax returns and accounts. VAT and PAYE payments are also thoroughly checked. The aim in every case is to collect more tax.
A proportion of cases will be selected for full enquiry on an entirely random basis as part of the Error and Fraud Analysis Programme (EFAP). The selection will be carried out by Head Office from across the entire tax credits population. These cases are known as EFAP enquiries.

Directors & Partners

Directors or Partners (including their spouses / civil partners) of declared clients are automatically included, subject to the agreed external income limit of £50,000 p/a

Limits of Indemnity

Special Civil Investigations           £10,000
Judicial Review                             £10,000
All Other Claims                            £100,000