Glossary · UK
What is Tax Investigation Insurance?
Commercial insurance that covers professional fees incurred when HMRC opens an enquiry or investigation, protecting businesses and individuals from unexpected adviser costs.
Full Definition
Tax investigation insurance (also called fee protection insurance) covers the accountancy and tax adviser fees that arise when HMRC opens a formal enquiry or compliance check into a tax return, VAT return, PAYE/NI records or employer obligations. HMRC opens several hundred thousand enquiries per year, and even a routine aspect enquiry (where HMRC questions one specific item on a return) can generate fees of £1,000-£5,000 or more; a full enquiry or COP9 investigation can run to tens of thousands of pounds in adviser time. The insurance itself does not cover any tax, interest or penalties found to be owed -- it covers only the professional fees for dealing with HMRC. Premiums are typically in the range of £150-£300 per year for a sole trader or small limited company, rising to £400-£600 for larger or more complex businesses. The cost of the insurance premium is generally deductible as a business expense for corporation tax or income tax purposes. Many accountancy firms offer this insurance as part of their client service package, either included in the annual fee or as an optional add-on. It is worth noting that the insurance does not guarantee a better outcome with HMRC -- it simply removes the financial deterrent that might otherwise prevent a taxpayer from defending a legitimate position robustly.