HMRC Investigation Insurance provides financial protection and peace of mind in the event of an HMRC tax inquiry, including those related to IR35 compliance.
In addition to HMRC investigation insurance it is very common to also purchase tax liability insurance, to protect against the chance that HMRC find you have paid the incorrect amount of tax through one of their investigation.
It is important to note, that even if all of your accounting and IR35 policies have been conducted correctly, the time taken up by an HMRC investigation can be extensive and companies are often chosen at random for investigation. Mighty’s software and service fee does not include support in the event of an HMRC enquiry, so this insurance ensures you are protected for the assistance, expertise and cost an HMRC investigation could impose on your business.
A graphic designer: Mark, a freelance graphic designer, also benefits from HMRC investigation insurance insurance when HMRC randomly choose his company for investigation. HMRC queries his tax returns, leading to a comprehensive review of his financials. Mark's insurance helps cover the costs of professional advice to navigate the inquiry and any financial adjustments required by HMRC’s findings.
An IT consultant: Sarah works through her own limited company. She contracts primarily with one large client and manages her business similar to how an employee might operate, which potentially puts her at risk of falling under IR35 legislation. Despite her efforts to comply with tax laws, she faces a sudden, detailed audit from HMRC questioning her IR35 status and her reported earnings and deductions.
Sarah's HMRC investigation insurance becomes invaluable when the audit results in a substantial additional tax demand, along with penalties and interest for supposed non-compliance. The insurance covers the costs associated with legal representation during the audit, as well as the financial repercussions of the adjusted tax demands. This protection allows Sarah to continue her freelance operations without the crippling financial burden that such tax disputes can often incur.
By having tax liability insurance, freelancers like Sarah and Mark can safeguard themselves against the uncertainty and potential financial difficulties arising from tax audits and disputes. This insurance ensures that they can focus on their professional services, knowing that they have a financial safety net in place.
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