Tax Investigation Insurance
Why do I need it?
An HMRC enquiry can cost thousands in accountancy fees — even when no extra tax is due.
If you are subject to an HMRC enquiry you can incur thousands of pounds in accountancy fees, even if at the conclusion it is found that there is no additional tax to pay.
For a modest premium, Tax Fee Protection Insurance covers accountancy fees incurred by your accountant in the event of an enquiry, providing you with peace of mind, knowing that your accountant’s fees are covered and you have the resource to provide a strong defence.
Being the subject of an HMRC enquiry is stressful, Fee Protection Insurance will help you to relax.
HMRC secured £48 billion in additional tax through its compliance activities in 2024/25, according to its latest annual report — up from £30.3 billion just seven years earlier. HMRC is also changing the way it works: over 40% of that figure now comes from "upstream" activity, where HMRC intervenes before a tax return has even been submitted. Any individual or business can be subject to an enquiry, even if your affairs are entirely in order.
Through Sch36 of the Finance Act HMRC has wider powers than ever before, and the government has committed to recruiting 5,500 additional compliance staff over the next five years to help meet its ambitious targets. In 2024/25 alone, HMRC brought 310 criminal prosecutions with a 91% conviction rate.
The chances of you being subject to an HMRC enquiry have never been higher.
The FeeProtect product is underwritten by ARAG Legal Expenses Insurance Company Limited and administered by ARAG plc.
Worked example
An illustration of how the insurance works
We have been asked multiple times to provide an example of what the insurance does. Using very simplistic numbers: you get notified by HMRC that you/your business owes £7,500 in unpaid tax. You instruct your accountant to work on your behalf and provide information to HMRC and hopefully get the tax demand down. Let’s say the accountant spends £1,500 of their time.
✗ Without Tax Investigation Insurance
The best case scenario: your accountant manages to get the tax bill down to £0, you still have to pay £1,500 in total with their fees.
The worst-case scenario: your accountant hasn’t been successful so you owe the £7,500 to HMRC and £1,500 to the accountant meaning your total is £9,000.
✓ With Tax Investigation Insurance
The best case scenario: your accountant manages to get the tax bill down to £0 and the £1,500 is paid for by the insurance. Your total is £0.
The worst case scenario: your accountant has not been successful, so you owe £7,500 to HMRC but the professional fees are paid for by the insurance meaning your total is £7,500.
Please remember — Tax is not optional and Tax Investigation Insurance does not cover the amount owed to HMRC. It simply covers the professional fees associated with a HMRC enquiry.