Tax and VAT investigation cover

This benefit of IPSE membership kicks in if HMRC is investigating one or more of your tax return submissions, and has determined that you owe money. This will typically take the form of either a Full or Aspect enquiry into: Corporation Tax Returns, Partnership Tax Returns, Sole Trader Tax Returns, or Personal Tax Returns. Income tax and Corporation tax are both covered under this benefit to ensure that sole traders and limited companies alike are protected.

An Aspect enquiry is when HMRC is investigating one or two aspects of your tax return. Typically, HMRC will be looking for clarification on your entry for the aspect in question by requesting evidence or asking further questions. 

What is a Full enquiry? 

A Full enquiry is when HMRC are dissatisfied with the tax return as a whole. It involves checking the whole return, and typically the business accounts. While this is rarer than an aspect enquiry, it can typically occur when HMRC have used software to compare your returns against other companies in your industry.  

What is a dispute? 

Following an initial check of your tax return, if HMRC is still dissatisfied with your return, it will be looking to recoup the tax it is believed you owe. You'll know that a dispute has begun if you are asked to complete a Working Practices Questionnaire. 

What could HMRC be investigating? 

Full and aspect enquiries into:   

• Corporation Tax Returns   
• Partnership Tax Returns  
• Sole Trader Tax Returns    
• Personal Tax Returns   

Disputes into:   

• VAT   
• Employer Compliance (PAYE, P11D and NIC) 
• IR35

HMRC use of Information and Inspection Powers/Sch. 36 Pre Disputes in respect of:   

• VAT reviews and inspections    
• Employer Compliance Visits    
• Check of Employer Records    
• Check of Coronavirus Job Retention Scheme (CJRS) claims   
• Check of Self-Employment Income Support scheme (SEISS) claims   
• National Minimum Wage reviews    
• Interventions    
• Requests for information   
• Capital Gains Tax   
• Gift Aid Audits   
• Construction Industry Scheme

Having access to a specialist to defend you ensures you receive the best defence to protect your tax position, enables Markel to challenge HMRC’s assertions and assumptions head on, and confirms that the basis of any enquiry is correct and that your case is handled fairly.  

As an expert in these matters, your specialist will make sure that the tax inspector is only asking for relevant information and documents, and will handle all communications with HMRC, including letters, phone calls or notices issued. They’ll also be able to argue any complex or technical tax cases that are raised during the enquiry. Whether it’s a PAYE or VAT visit, a technical challenge or a detailed books and records enquiry, Markel's tax investigations service is designed to get you a fair result. 

Unlike other providers, many of Markel's specialists are former HMRC employees, which means they are very familiar with the procedures involved and are experts in this field.  

Be sure to check what's really on offer from others - often the cover isn't quite what it seems and there's an excess to pay if you make a claim. This alone usually costs more than IPSE Director membership! 

Additionally, IPSE is much, much more than just tax insurance. As a not-for-profit representative body IPSE works hard on your behalf to make your life as an independent professional much easier and make sure that your way of working is recognised and welcomed. IPSE also gives you access to many other benefits such as the money-saving IPSE Rewards platform, vital business templates, and all the right tools to help protect and empower your business, all in one place. 

Read more FAQs about IPSE tax investigation cover >

For example:

One case that was covered through IPSE membership and taken to tribunal would have normally cost the member around £75,000 without this service. While this case is on the higher end of what we typically see, on average these investigations cost around £5,000-£6,000. That’s the equivalent of one year of Director membership fees, 15 times over. 

IPSE Umbrella members also have access to Run-off IR35 enquiries cover which provides up to £25k indemnity for representation to deal with an enquiry by HMRC into the application of the IR35 legislation. Members who have previously operated via a limited company but now provide their services through an umbrella can rest-assured that they are still protected for historical contracts. 

Run-off cover is not included in Director membership because as a Director member you have IR35 investigation cover included in the overall tax investigation insurance.

Lots of HMRC tax investigations can be stopped before they start. Before an investigation starts, typically your tax affairs would be checked by HMRC to make sure you’re paying the right amount. They will get in touch with either you or your accountant to say what they want to check. This could be:

• any taxes you pay
• accounts and tax calculations
• your Self Assessment tax return
• your Company Tax Return
• PAYE records and returns, if you employ people

IPSE Director members are covered from the point that this initial notice is received, and IPSE will try to stop the investigation before it becomes a dispute. Any time spent on this by our specialists will be covered by your membership. 

How does it work?

IPSE's specialist insurers, Markel Direct, will draft a response to the initial notification from HMRC removing the stress and minimising the risk of responding incorrectly. If HMRC want to proceed with the check, IPSE will represent you at no cost. Any time spent by Markel's specialists on this letter response is completely covered by membership. 

If you are an IPSE Director member and receive a compliance check letter from HMRC, you can make a claim via your member dashboard on the IPSE site. Once you've made the claim, you'll be assigned a specialist to handle your claim. Many of Markel's specialists are former HMRC employees, which means they are very familiar with the procedures involved and are experts in this field.  

The specialist will ask you to complete a questionnaire and will follow up with a phone call where you can discuss your contract and working practices, to ensure that they understand as much about your individual circumstances as possible. They'll then be able to put together a response letter to HMRC, highlighting the important elements of your contract and any other relevant information.  

This entire process could typically cost anywhere from £500 - £1500, but is covered by IPSE Director membership. 

If you are an IPSE member and you receive any correspondence from HMRC that you aren't sure about, we recommend you contact the Tax helpline as soon as possible.