With HM Revenue & Customs' extended powers now in place, which include the right to enter business owner's homes, new research from Premierline Direct reveals that one in five of the UK's small businesses are living in of fear being investigated. Entrepreneurs say the threat of an investigation is more stressful than moving house (14%) or even starting up the business (17%) and for more than one in ten (13%), the worry causes sleepless nights.

With entrepreneurs already struggling with the recession, the poll highlights that the new inspection powers will add to the pressure business owners are under. Of the 32% of small businesses that have experienced an investigation, nearly half (48%) said it was very disruptive to their business, 35% said it wasted a lot of time and one in five (17%) found it difficult to concentrate on managing their company during the process.

According to the research, businesses in the North East are the most concerned about being investigated, with nearly half (45%) fearful of a visit from HM Revenue & Customs, double the national average. In addition, the common perception that women are more organised than men is reflected by the fact that female entrepreneurs don't find a tax inspection as troublesome as their male counterparts; 28% of women say it is disruptive compared to 53% of men, and 25% said time was wasted compared to 37% of men.

As part of the new powers, which came into force on 1 April 2009, HM Revenue & Customs has the right to enter the homes of the thousands of business people and sole traders who claim expenses for 'use of home as an office' to inspect their business records. This power includes visits to any business premises, including any part of a residential home used as an office.

Despite the research showing that small firms fear an inspection and find it a cause of constant concern, many business owners overlook the cover available that will provide peace of mind in the event of an investigation. Only 18% of SMEs have commercial or legal protection insurance, which would cover the legal expenses in the event of a dispute. Instead, if investigated, nearly a third (31%) would have to pay for advice out of personal savings, a quarter (23%) would have to use business savings and 23% would rely on profits.