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A Tale of Two Tax Enquiries

A tale of two tax enquiries – Why you should consider Tax Investigation fees protection and why HMRC are now starting to look at the VAT Flat rate scheme more.

What is Tax Investigation fees protection?

Our blog post from May last year covers everything that you need to know –  

Basically, it’s a scheme that will cover the cost of our fees if you are subject to an HMRC tax enquiry into your tax affairs.

A tale of two tax enquiries…..

We currently have two clients under tax enquiry with HMRC looking at the way they are operating the VAT Flat rate scheme (this is not unusual for a firm of our size to have a few clients under tax enquiry at any one time)

One client has tax investigation fee protection, the other doesn’t. Both are feeling the stress that an HMRC enquiry brings, even if in both cases it looks like neither client will have any significant underpayments of tax and neither of them have done anything “wrong”.

One client is however also worrying about the costs of dealing with the tax enquiry which could be a few thousand pounds.

So why cover the costs of tax investigations then?

For a number of reasons

1. It gives you peace of mind regarding the cost of fees in the event of an HMRC tax enquiry
2. It allows us to help “fight” your case with HMRC if you are subject to an enquiry and this should mean that you get a better outcome, without the worry of dealing with the costs
3. HMRC are starting to target certain areas now ( e.g. certain trades and users of certain tax schemes ) so dealing with HMRC tax enquiries are now becoming more expensive as they tend to be more “in-depth”

Are HMRC looking at the VAT Flat rate scheme more?

The VAT Flat Rate Scheme is a vat scheme that allows small business to charge their customers 20% VAT and then pay HMRC a lower % over to them in exchange for then not claiming the vat back on the businesses costs. It is also designed to reduce the paperwork burden for small businesses when completing their quarterly VAT returns.

Most of our clients using this scheme however, tend to also make a few thousand pounds profit (Legitimately) each year from using this method of accounting for their VAT.

We are hearing that HMRC are starting to look into more businesses that use the VAT flat rate scheme to ensure that they are operating this correctly. Part of the initial “appeal” of this scheme when it was first announced by HMRC was that they should not need to review how it was been used as it is very simple to operate and for them to check and therefore they shouldn’t need to review the VAT affairs of anyone using it.

It seems that this viewpoint may be changing….

I’m interested in taking the fee protection cover then

Use the link above to our Blog post from May last year as this gives you details on how to take this cover.

You can also contact your usual Carden’s contacts for details on how to join or simply
Phone us on 01273 739592
Email us at

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