Article reproduced from the Schmidt Report
Apart from serious illness, a tax investigation is possibly the most unpleasant thing that many people go through in their lives. One of the reasons it is so unpleasant is because it is expensive: not just in terms of extra tax you may have to fund but also in terms of the cost of professional support in the investigation. For all but the simplest of the Revenue’s inquiries, we think it would be foolish of any taxpayer under investigation to try to go it alone without the benefit of professional advice.
There are so many ways of getting yourself into trouble, and the system of balancing your rights against the rights of the Revenue to information is so complex that, without a Virgil to guide you through the Inferno, you could easily end up hugely disadvantaged at the end of the day.
This is where professional-fee insurance comes in.
A number of schemes exist under which your accountant can cover all of his costs for dealing with in-depth investigations by way of an insurance claim. You shouldn’t have to pay a penny in fees throughout the whole investigation.
Sometimes, too, the existence of professional-fee insurance can actually get you a better result in terms of the amount of tax you end up having to cough up, or not cough up as the case may be.
Very often there is an unspoken assumption on the part of the Tax Inspector that the taxpayer is keen, or even desperate, to bring the investigation to a close as soon as possible. Although, as we say, he never says so, alot of Inspectors use this undoubted fact as leverage in the negotiations, agreeing a higher settlement figure than otherwise would have been the case because of the taxpeyer’s fear of the massive bills that keep coming through his door from the accountant.
How different the situation is if your fees are covered by insurance! You can even tell the Inspector, and it is often a very good idea to do so, that you personally don’t care how long the investigation goes on because it isn’t costing you any money. This can have a curiously dampening effect on the Inspector’s enthusiasm!