TALK TO AN EXPERT
Our team of experts are available to talk to Mon-Fri 08.30-17.30 and Sat 10.00-14.00
Legal Expenses Insurance covers the cost of legal issues across a wide range of business situations, from employment tribunals to debt recovery. Tax Enquiry Insurance covers the professional accountancy fees incurred when HMRC investigates your tax affairs. The two cover different risks, and many self-employed tradespeople benefit from holding both.
Running your business comes with plenty of financial risks that are straightforward to picture: a stolen tool, an injured third party, a storm rolling through overnight and damaging the site you’re working on. But some of the most disruptive costs are the ones you can't see coming - a client who doesn’t pay after you have completed a job, an employee who raises a grievance, or a letter from HMRC asking questions about last year's return.
Legal Expenses Insurance and Tax Enquiry Insurance both exist to protect you from unexpected costs in exactly these situations. But they do different jobs, and it's worth understanding clearly which is which before deciding what your business actually needs.
What is Legal Expenses Insurance?
Legal Expenses Insurance covers the cost of legal representation and advice across a wide range of disputes and proceedings that can affect small businesses and sole traders. Think of it as a safety net for the legal side of running your business - the disputes that crop up when things go wrong with clients, employees, premises, or regulators.
Here at Rhino, Legal Expenses Insurance costs £85 a year. It covers ten distinct areas of legal risk, and policyholders also get access to a dedicated legal advice helpline. Take a deep-dive here.
What is Tax Enquiry Insurance?
Tax Enquiry Insurance covers the professional accountancy and legal fees you incur when HMRC opens an investigation into your tax affairs. It doesn't pay any tax you owe, and it doesn't prevent an investigation from happening. What it does is ensure that when HMRC does come knocking, an appointed accountant can respond properly on your behalf without you picking up the bill.
Here at Rhino, Tax Enquiry Insurance costs £35 a year. Policyholders get free access to a tax advice line through Vantage Fee Protect on 0116 243 7892, available on weekdays.
What is the key difference?
The clearest way to separate them is by the type of risk they address:
Legal Expenses Insurance covers issues involving other people and organisations: clients, employees, landlords, regulators, and the courts.
Tax Enquiry Insurance covers your relationship with HMRC specifically: the professional costs of responding when they investigate your tax affairs.
An employment tribunal brought by a former employee is a Legal Expenses matter. An HMRC enquiry into your CIS deductions is a Tax Enquiry matter. Both are real risks for tradespeople. Neither policy covers the other.
What does Legal Expenses Insurance cover in full?
At Rhino, Legal Expenses Insurance covers ten sections:
Employment disputes: Defence costs if a former or current employee brings a claim at an employment tribunal.
Health and Safety prosecutions: Defence costs for proceedings under the Health and Safety at Work etc Act 1974.
Criminal prosecution defence: Legal costs if you face criminal proceedings connected to your business.
Jury service: An allowance of up to £100 per day, capped at £1,000 per claim, if jury service disrupts your working week.
Property disputes: Legal costs arising from disputes over any premises used for your business.
Data protection matters: Cover for legal proceedings relating to data protection.
Personal injury pursuit: Legal costs for pursuing personal injury compensation if you are injured.
Debt recovery: Recovery of uncontested debts over £500, with a maximum of five claims per year.
Restrictive covenants: Legal costs for disputes relating to restrictive covenants.
Wrongful arrest defence: Legal costs if you are wrongfully arrested.
It's worth noting that any dispute, event, or circumstance that arises in the first 90 days of a new policy is not covered. Pre-existing disputes are also excluded, as are intellectual property rights, fines and penalties, and routine inspections. The policy works on a claims-made basis.
What does Tax Enquiry Insurance cover in full?
Tax Enquiry Insurance covers the professional fees incurred in responding to a range of HMRC enquiries, including income tax and corporation tax investigations, PAYE compliance checks, IR35 enquiries, and VAT disputes. For tradespeople working under the Construction Industry Scheme (CIS), where HMRC scrutiny of labour payments and deductions is relatively common, this cover is particularly relevant.
What the policy doesn't cover is equally important to understand. It doesn't pay for preparing your tax return, and it won't cover penalties or fines HMRC imposes. Tax avoidance schemes, criminal prosecutions, late-filed returns, and National Minimum Wage disputes are also excluded. The cover responds specifically to HMRC opening an investigation not to how your return was compiled.
Claims must also be notified within 30 days of the policy expiring if the enquiry arises after the renewal date. A 14-day cancellation window applies at the start of a new policy, during which a full refund is available if no claims have been made.
Which situations does each cover?
A decorator finishes a job, and the client refuses to pay. That's a Legal Expenses matter: the debt recovery section of the policy can help pursue the unpaid invoice.
That same decorator receives a letter from HMRC querying their self-assessment return for the previous tax year. No wrongdoing is implied - it's a routine enquiry. They need an accountant to spend several hours responding and gathering records. That's a Tax Enquiry matter: the professional fees for that response are covered by Tax Enquiry Insurance.
Both scenarios are realistic for any self-employed tradesperson. One policy wouldn't have helped in the other's situation.
Do I need both?
For most self-employed tradespeople, holding both makes practical sense. Legal Expenses Insurance provides broad protection across the legal issues that running a business inevitably brings with it. Tax Enquiry Insurance covers a specific and common risk that sits entirely outside Legal Expenses' scope.
Together at Rhino, both policies cost £120 a year - £85 for Legal Expenses Insurance and £35 for Tax Enquiry Insurance. For cover across ten legal risk areas plus full HMRC enquiry protection, that represents strong value for a small business.
How much do they cost?
Cost | Yearly | Monthly |
|---|---|---|
Legal Expenses Insurance | £85 | £7.08 |
Tax Inquiry Insurance | £35 | £2.92 |
Both Together | £120 | £10 |
For context: a single employment tribunal can cost thousands in legal fees before it concludes. An HMRC investigation requiring several hours of accountancy time can easily run to hundreds of pounds. Either policy can more than pay for itself in a single year of use.
If you're also looking to protect your business from the most common liability exposures, you’ll need to hold Public Liability Insurance with Rhino and, if you employ anyone, Employers' Liability Insurance.
Get Legal Expenses Insurance and Tax Enquiry Insurance in place today. Both available from Rhino, with quotes in under 60 seconds.
Frequently Asked Questions
Legal Expenses Insurance covers the cost of legal disputes across a wide range of business situations, including employment tribunals, health and safety prosecutions, and debt recovery. Tax Enquiry Insurance covers the professional accountancy and legal fees incurred when HMRC investigates your tax affairs. The two cover different risks and do not overlap.
Legal Expenses Insurance at Rhino covers ten areas: employment disputes, health and safety prosecutions, criminal prosecution defence, jury service allowance, property disputes, data protection matters, personal injury pursuit, debt recovery (uncontested debts over £500, up to five claims per year), restrictive covenant disputes, and wrongful arrest defence. Policyholders also get access to a legal advice helpline on 01480 852 080.
Tax Enquiry Insurance covers the professional accountancy and legal fees incurred when HMRC opens an investigation into your tax affairs. This includes income tax and corporation tax investigations, PAYE compliance checks, IR35 enquiries, and VAT disputes. It does not cover the cost of preparing your tax return, penalties or fines imposed by HMRC, or tax avoidance schemes.
For most self-employed tradespeople, holding both makes sense. Legal Expenses Insurance covers a broad range of legal disputes that can affect your business. Tax Enquiry Insurance covers the specific and common risk of an HMRC investigation. Neither policy covers what the other does, and together they cost £120 a year at Rhino.
At Rhino, Legal Expenses Insurance costs £85 a year (£7.08 per month) and Tax Enquiry Insurance costs £35 a year (£2.92 per month). Holding both together costs £120 a year.
Get Legal Expenses Insurance and Tax Enquiry Insurance in place today. Both are available from Rhino.
