Protection during tax audits: why every entrepreneur needs this
Tax optimisation pays off. But the further you go in utilising tax allowances, the greater the chance that the tax authorities will come to investigate. Not because you did something wrong, but simply because that's what they do. And by then, you don't want to be caught out by any surprises.
A tax audit or dispute costs money. Not just if you are in the wrong, but also if you are entirely in the right. Because the lawyers and accountants defending your case will simply send an invoice.
Fortunately, there's something that protects you against that: tax legal expenses insurance.
What is tax legal expenses insurance?
It's insurance that covers the costs of your defence when you get into a dispute with the tax authorities. This includes the fees of your accountant, tax advisor, or lawyer – in the event of an inspection, an objection procedure, or a lawsuit.
So you don't pay the specialists who assist you yourself. The insurance covers these costs, up to a coverage limit of £50,000 per conflict.
When is this really useful?
Will my company be protected if a tax audit?
Yes — and that's precisely what it's all about. The insurance covers conflicts surrounding:
- Corporation tax
- By the way
- Corporate tax
- Director's personal tax (and that of their partner)
Specifically, the insurance pays out when:
- The taxman a Request for information sends
- Is there announced inspection takes place
- You are objection procedure of legal proceedings must feed
- You are Exemption requests
In short: from the first registered letter to the court — you are not alone.
What if I optimise and the tax authorities don't agree with it?
That's precisely the scenario this insurance was made for. Tax optimisation doesn't mean you're cheating — it means you're making the most of legal loopholes. But the line between optimisation and questionable practice is sometimes thin, and the taxman doesn't always draw that line where you do.
If your accountant or tax advisor filed your return, and an audit comes up, then the insurance will pay the costs of that expert to assist you. Free choice of expert or lawyer included.
How much does such insurance cost for a management company?
Surprisingly little, considering what it can gain you. For a management company you don't pay €500 – regardless of its size.
For that amount, you're covered for the full defence costs in a tax dispute, up to €50,000 per claim. The size of your company doesn't affect the premium.
What is not covered?
Honesty is the best policy. A few things are excluded from cover:
- The self-assessment which you may owe
- Situations of tax fraud (wilful evasion)
- Costs when you file a tax return not or too late document submitted
- A ruling applications to the Advance Decisions Service
In short: the insurance protects you in honest disputes and checks - not in cases of fraud or negligence.
Even after your company has been wound up, you are still covered.
A detail few people know: when your company is liquidated or dissolved, the insurance remains valid for any fiscal tailwinds. without time limit. This is referred to as the run-off risk, and it is covered for VAT, corporate tax and income tax.
Is this something for you?
If you work with a management company and take tax optimisation seriously, the answer is simple: yes.
Not because you have something to hide. But because you know that tax rules sometimes change — and that in a dispute, you won't want to have to choose between being in the right or paying the bill for your defence.
For less than a weekend away, you have a year of peace of mind.
Want to know more? Give us a call, we'll put you in touch with the right insurer!
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