Tax Investigation Insurance for Limited Companies

Tax investigation insurance for limited companies covers your accountant’s professional fees when HMRC opens an enquiry into the company. Solar Protect pays up to £100,000 towards defending Corporation Tax, PAYE, NIC, VAT, IR35 and CIS checks, with no excess, and you keep your own accountant. It meets the cost of professional representation, not the tax, interest or penalties, and directors and partners can usually be included subject to limits.

An HMRC enquiry into a limited company can run for months and draw in several taxes at once. Even when your figures are right, someone has to answer HMRC, gather records and argue the technical points, and that professional time is charged to you. This page explains why companies are selected, how a company enquiry differs from a sole trader one, and how the cover works for directors and finance leads.

Why does HMRC open enquiries into limited companies?

HMRC checks a company’s tax position to make sure the right amount has been paid. A company can be selected either at random or because something in a return, a set of accounts or third party data prompts a closer look. HMRC normally has 12 months from the date it receives an on time Company Tax Return to open a formal enquiry, and that window can run longer where a return is filed late.

An enquiry can be an aspect enquiry, looking at one or two specific entries, or a full enquiry covering the whole return. Once it is open, HMRC can ask for information and documents, question the treatment of items and, at the end, assess additional tax and penalties where it decides too little was paid. Responding properly is what protects the company, and that response is the work your accountant carries out.

Which taxes can an HMRC company check cover?

A limited company sits across more of the tax system than a typical individual, so more of it can come under review. Solar Protect responds to:

Corporation Tax full and aspect enquiries
PAYE and NIC compliance checks
VAT compliance checks
IR35, employment status and CIS enquiries
Code of Practice 8 investigations, which HMRC uses for complex cases where a significant amount of tax may be at stake and fraud is not alleged

If you want the wider picture of how the product sits alongside an accountant’s work, see what tax fee protection insurance is and what happens in an HMRC compliance check.

How is a company enquiry different from a sole trader enquiry?

A sole trader enquiry usually centres on one person and one Self Assessment return. A company enquiry can touch the company return, the payroll, the VAT account and the contracts behind IR35 or CIS, sometimes together. There are more records to produce, more people involved and more technical ground to cover, which is why the professional time needed tends to be greater. If your structure is different, our pages for sole traders and contractors set out the equivalent cover.

Can a director’s personal tax be drawn in?

Yes. When HMRC reviews a company, it often looks at how value reaches the people who run it, so dividends, benefits in kind, expenses and directors’ loan accounts can all be questioned. That means a director’s own tax position can become part of the same enquiry. Under Solar Protect, directors and partners can be included in the cover subject to limits, so their personal representation costs are not left outside the policy.

What do the professional fees to defend a company enquiry involve?

The fees are for the work of representing the company, not the tax itself. In practice that can include reviewing HMRC’s opening letter, corresponding with the officer, collating and explaining records, attending meetings, preparing technical arguments, negotiating the outcome and, where needed, taking a dispute to review or tribunal. Across several taxes and several months, those hours add up, and they fall on the company whatever the enquiry finally concludes.

How does tax investigation insurance for limited companies work?

Solar Protect covers up to £100,000 of your accountant’s professional fees for a covered enquiry, with no excess to pay. You use your own accountant rather than a panel firm, so the people who already know your company handle HMRC. The policy pays the professional representation fees only, so any tax, interest or penalties HMRC assesses remain payable by the company.

Solar Protect and Apex Insurance Brokers are part of the same group, with Apex arranging professional indemnity for professional firms, so cover for a company and its advisers can be considered together.

If tax investigation insurance for your limited company would give your board and finance team one less thing to worry about, you can get a quote or contact us to talk through what your company needs.

Related guides: tax investigation insurance for partnerships.