If HMRC opens a compliance check into your tax affairs, your accountant has to do the work of responding to it: gathering records, answering questions, corresponding with HMRC and, where necessary, arguing your case. That work is chargeable, and it is not covered by your normal accountancy fee.
Tax fee protection insurance pays those professional fees. It does not pay any tax, interest or penalties that HMRC decides you owe. It pays for the defence, not the bill.
What HMRC actually does
HMRC calls these compliance checks. They range from a single question about one figure on a return through to a full review of a business’s records over several years. A check does not mean HMRC believes you have done something wrong. Returns are selected by risk profiling and, in some cases, at random.
How long HMRC has to open a check
For a Self Assessment return filed on time, HMRC generally has 12 months from the date the return was received to open an enquiry. If the return was filed late, the window runs to the next quarter date (31 January, 30 April, 31 July or 31 October) after the first anniversary of the date the return was received.
That window closing does not end the matter. Where HMRC later discovers that tax has been under-assessed, it can raise a discovery assessment. The time limits are:
- 4 years from the end of the tax year, where the loss of tax was not careless or deliberate
- 6 years, where the loss of tax was due to careless behaviour by you or your agent
- 20 years, where it was deliberate
Longer limits apply in specific circumstances, including offshore matters and failure to notify chargeability. The point for most people is simple: a return you filed several years ago is not necessarily closed.
Why your accountant’s fees are the problem
Most people assume that if HMRC asks questions, their accountant answers them as part of the annual fee. In practice a compliance check is separate work, charged at the practice’s hourly rate, and the amount of it is decided by HMRC rather than by you. A check that runs for months across several tax years can cost more in professional fees than the tax at stake.
That is the exposure tax fee protection is designed to remove. It is also why the premium is rated partly on your accountant’s hourly charge rate: the cost of the risk is the cost of their time.
What Solar Protect’s cover provides
- Up to £100,000 of your accountant’s fees
- No excess
- You use your own accountant, not a panel firm
Cover, exclusions and conditions are set out in full in the policy wording and summarised in the summary of cover. Read both before you buy. Not every type of HMRC activity is covered, and there are circumstances in which a claim would not be met.
Who it is for
Anyone who files a return can be selected for a compliance check. Cover is available for:
- Sole traders
- Private tax returns, where you are not trading but still file
- Limited companies and partnerships
What it costs
The premium depends on your accountant’s hourly charge rate and your turnover and VAT position, so there is no single price. You can get a figure in under a minute without sending us any documents: get a quote. The price shown includes Insurance Premium Tax and our administration fee, and you can pay annually or monthly.
If you are an accountancy practice
Most tax fee protection is bought through accountants rather than direct. If you are a practice and want to offer cover to your clients under your own scheme, that is a different conversation: see tax fee protection schemes for accountants.
Common questions
Does it pay the tax I owe?
No. It covers professional fees for defending the check. Any tax, interest or penalties remain yours.
Can I buy it once HMRC has already contacted me?
No. Like any insurance, it covers events that arise after cover starts. A check that has already been opened is not an insurable risk.
Do I have to change accountant?
No. You use your own accountant and the policy responds to their fees.
Is being selected a sign HMRC suspects something?
Not necessarily. Selection is largely risk-based, and some checks are random.