To ask if any self employed have ever had a hmrc investigation?

[SapphireBattersea]

I am quite newly self employed and submitted my first years accounts a few weeks ago via my accountant. HMRC have accepted my return so All seems fine.

However my accountant is trying to sell me this "tax investigation service" cover, where if my business gets investigated, the practice cover any fees involved to deal with HMRC on my behalf. it's £160 a year so not a huge amount but I'm not paying for something I don't need and may not!

I have nothing to hide, however having done a bit of googling it seems that if you're picked for a random investigation it can be really stressful and costly.

So I wanted to ask has anyone actually had this happen? And would it be worth paying for the cover?

Yeah I think I will take some out but I'm gona shop around

Worries me that because of my line of business i might be considered somehow dodgy by hmrc just because some people risk taking cash and not declaring it

The likely hood is that you won’t get investigated but for peace of mind it’s worth the insurance imo.

We were inspected within the first three years of setting up as self employed. Then not a thing for 25 years.

Business is now closed due to retirement.

The inspection required all up to date records and invoicing. Lovely lady stayed for three days meticulously looking at paperwork whilst we had to be available to answer questions when they arose.

Not worth paying out £160 a year in insurance but it's a bit inconvenient having to reschedule clients, I'm guessing you'd still have to postpone work even with insurance.

Check if you get any other benefits, the insurance I am familiar with also gives users access to helplines for tax queries, HR and health and safety queries.

You can get that insurance for about £50. Your accountant is applying a pretty hefty mark-up on that one. For £177 you could join the FSB (Federation of Small Businesses) and get cover included, along with a range of other protections / perks as well. That might be a better option?

Ooh I'll look into that @Leafyhouse

Thank you

And thanks everyone for all the comments x

I'm SE, first as a child minder and now as a cleaner/gardener. I've never made much each year (less than 10,000), so I can't see why they'd come out to see me.
All my accounts are done by me and I hardly claim anything apart from mileage and materials.

I have the insurance as part of my IPSE membership but when I had a VAT inspection last year my accountant dealt with it as part of their normal duties and didn’t charge me any extra ( I bought him some wine Nd choccies)
The VAT inspector was actually really nice and it was all fine but my accountant had briefed me well before and sat in The meeting with me

I made a whopping (approx) 3000 last tax year 😆. Although I only started in October 2018 and so my accounts were only for about 6 months trading

I'm on track to make around 4 times that this financial year though so I'm worried that might flag me up as dodgy

I don't keep records as such either apart from receipts and invoices. I also record my mileage and note down my payments from clients as they come in, but that money goes into my bank anyway.
so is there anything else I should be keeping ? Feel so silly asking 😳

My accountant offered the same thing to me. I don't deal in cash, and I am happy to take the risk of being investigated without insurance.

OP all you have to do is put yourself in the other persons shoes.

Imagine you are tasked with investigating whether YOU are honestly recording all your income from your trade. Mull it over from that point of view for a couple of hours.

I offer this to clients, but that is expensive for a self employed policy. Sounds like you are with a big firm

There are very few 'unique' businesses. What ever you do, the revenue will have hundreds (if not thousands) of people doing the same thing. Their data will show them what the average turnover and profit will be for your sector. If your figures deviate from their 'norm' for your business then they are likely to be interested.
We had interests in the licensed trade, in those days in that industry VAT returns were made on a monthly basis. We converted some outbuildings into additional bedrooms. For a few months, due to the purchase of building materials, we claimed VAT back instead of paying it. Cue a VAT investigation! The inspector picked his way through the site and said "I think I have already answered most of my own questions", spent an hour or so with us and went happily on his way.

Another SE here. I don't have the insurance and my accountant has never offered it. I do however, keep really detailed info, about every job, every payment incoming and outgoing. I have files for each of my contracts, and everything is backed up by an actual paper trail, as well as an online one. It might be an idea to have a list of your clients, how often you see them, that kind of thing

I would have thought that increasing your annual profits over the first few years of self-employment was a normal sign of a successful business.

A very long time ago, when my mother was a teenager, her father was audited. Apparently she had to account for every last penny in her bank account, as no-one would believe that she wasn't being paid for spending all day every Saturday, and most of the holidays, working in their shop.

I'd second looking into the Federation of Small Businesses. My parents both have membership and it covers all the tax stuff plus you get an unlimited legal advice helpline which they've used a few times. Plus you get loads extra.

As I and others have said, an HMRC investigation can be quite lengthy and stressful even if all is in order. The insurance is really a small overhead.

Although I agree that yours seems excessively expensive. The insurance tends to deal with all HMRC stuff. Shop around - there are quite a few reputable companies who aren't giving kick backs to accountants.

Ooh I'm going to look into the federation of small businesses