We have referred on numerous occasions to the increase in claim numbers in recent months. It seems that never before has the risk of an HMRC enquiry been so high and with the economy once again faltering, it really is important that taxpayers seek adequate protection against the potentially high cost of dealing with an HMRC enquiry. 

Our April 2011 to March 2012 financial year has now closed and so it seems like an opportune moment to take stock and see where we stand in terms of claim notifications. At the end of the financial year we had received just over 4,300 new claim notifications, a significant increase of around 40% on the previous year.

Firstly it is important to note that this increase in claims does not cause us concern. Our insurer remains strong and our ‘premium pot’ finished the year in a healthy position, despite the increase in claim numbers. Our Policy is not a typical insurance policy, which you place in a cupboard and hopefully never use. We expect our clients to claim, and place an emphasis on quoting sustainable premium levels from the outset. Hence, we have a healthy ‘premium pot’, which is well equipped to absorb the increase in claim numbers.  

Next question, what has caused this increase? Drilling into this, it soon becomes clear that there are essentially two quite simple reasons:

1. We introduced the Taxwise Plus Policy almost three years ago, which increased the scope of cover significantly. In particular it extended cover in respect of VAT and PAYE Compliance Visits to cover the visit from the outset, regardless of whether there is a dispute.  Consequently we have seen an increase in the number of claims made in respect of PAYE and VAT Compliance Visits. This increased scope of cover is significant and tangible and really should not be underestimated.

2. Secondly HMRC have increased their activity. Quite simply between now and 2014/15 HMRC are targeted to deliver an extra £7billion in compliance yield, consequently they are opening more enquiries with a view to achieving this target. In terms of enquiry types whilst there has been a growth in the number of Sch 36 enquiries, the vast majority of enquiries are typical enquiry types. Basically, in the main, HMRC are doing more of what they have always done, as they attempt to increase the tax yield.

We have now almost two months into the 2012/13 financial year, and the early signs are that claims are levelling out, at last year’s levels, plus the expected inflationary increase. It appears that HMRC are not intending on easing off any time soon and against this continued back drop it really is more important than ever that clients obtain the protection of Fee Protection Insurance.   

For any further information on any of the issues outlined in this piece, please call the Advice Service on 01455 852555.