Tax protection insurance? Is it needed?

We have been looking into that 'Tax protection insurance' as well - is it a worthwhile cost? Does anyone know the chances of actually being audited? And surely there shouldn't be a cost to our company if all our books are supposed to be in order?

Any experiences with is would be great - thanks.

Thought I'd move you over to a new thread, because it's an interesting topic, and be good to get some feedback from accountants.

We get asked each year if we want to take out protection insurance in case HMRC decide to audit us.

But our accountants rubber stamp each months accounts, we are as squeaky clean with the VAT man as we can be, so why would we need to take out insurance?

Is this an industry wide money making scheme, or a genuine necessity? Anyone else had any experiences, of either taking out insurance, making a claim, or being audited?

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Glad i stumbled across this post now, being a fairly new business owner and just getting on my feet i am yet to have filed accounts as we are within our first year as trading.

I am going to have a look into this as i personally don't see the need for it if you run a tight ship and everything above board with HMRC and the tax man etc! why would you need an audit??

Could just be a make money quick thing someone has thought up by the sounds of it.

If I remember rightly, the sales pitch goes something like the average cost to a business that gets audited is £5k.

How this is broken down I don't know, time and resource? Unpaid VAT? The fact we are in year 6 and haven't been audited means apparently the odds are we will be in the near future?

If the VAT man lands, brings our business to a halt, and we end up with an unexpected £5k bill, then I think I'll be looking for a new accountant

A business owner I know who has been audited a couple of times, recommends deliberately leaving something obvious for HRMC to find, so they give you a bill and leave, rather than waste more time by digging and digging.

The naive part of me hopes this is just anecdotal and she isn't serious...

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Thanks for the replies, I am still unconvinced too, but at the same time I wouldn't like to be £5k out of pocket.

Sounds like a rehash of Peter Mandelson's idea (businesses - pay for insurance against the risk of you misinterpreting unclear government legislation). When I received the Mandelson letter I sent it to our local Trading Standards as a scam ... but it wasnt!

Not quite the same thing but my business was "investigated" by HRMC a long while ago for some unknown reason. Around that time HRMC were investigating a relatively high percentage of very small companies and leaving the bigger ones alone.

I was frantic with worry at the outset, went over my accounts in advance with a fine toothcomb etc .....

Yes, the process wasted a couple of days of my time (and the HRMC Inspector's). In my experience, though, if your accounts are squeaky clean and you have good, sensible reasons for your decisions and purchases then you've nothing more than wasted time to worry about. I certainly wouldn't pay £5K on the off chance a government inspector wanted to do an audit.

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