Paul Sanchez
Fee protection insurance is a policy that covers the cost of an accountant to defend, investigate and respond to an HMRC enquiry. It is designed to protect businesses and their advisers against the cost of being investigated by HMRC, which can be substantial. HMRC uses sophisticated IT systems and AI to spot unusual activity, errors, high-risk industries, trends, or changes, and can investigate any business of any size at any time. Fee protection insurance can provide peace of mind and protection from facing large bills, but it is important to consider whether it is good value for money in the long run, as premiums can increase over time.
| Characteristics | Values |
|---|---|
| Purpose | Protects against accountancy fees incurred dealing with an HMRC enquiry or compliance check |
| Cost saving | Settles the cost of tax compliance investigation bills from your accountant for up to six figures |
| Peace of mind | Provides peace of mind that accountancy fees will be covered in the event of an HMRC enquiry |
| Random selection | Protects against random selection for an HMRC investigation, which can occur even if tax affairs are in order |
| Time consumption | Saves time by allowing accountants to handle the investigation without worrying about additional fees |
| Additional services | Some providers offer access to helplines, digital solutions, and consultative services |
| Claim acceptance | Certain providers have a high claim acceptance rate, such as 99% claimed by Vantage |
| Premium increase | Premiums may increase over time, so it is important to consider the long-term value |
| Provider reputation | It is crucial to research provider reputation and quality of service, as some companies may prioritize their costs over the client's interests |
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What You'll Learn
Cost savings
Fee protection insurance offers cost savings by covering the professional fees incurred in dealing with an HMRC tax enquiry or compliance check. This includes the costs of an accountant's time in defending, investigating and responding to an enquiry, which can amount to thousands of pounds. For example, Markel offers a limit of £125,000 for individual indemnity claims, with some claims reaching this limit.
The insurance also covers the fees associated with a full investigation, where the entire tax return is reviewed, as well as aspect enquiries, where HMRC assesses specific areas of tax information. It is important to note that fee protection insurance does not cover any tax liabilities found to be owed, but it does provide peace of mind and protection from facing large professional fees.
Additionally, fee protection insurance can offer cost savings by providing access to tax helplines and consultative support, which can assist in avoiding or mitigating potential issues that may arise during an HMRC enquiry. Some providers, such as Vantage Fee Protect, offer access to experienced claims handlers and telephone advisors at competitive rates.
While the cost of fee protection insurance may vary, it is important to consider the potential savings in professional fees that can be achieved through this insurance. It removes the need for accountants to negotiate fees with their clients, ensuring 100% of the fees are recoverable. Furthermore, by partnering with an insurer that offers extended services, accountants can provide their clients with the perception of comprehensive in-house capabilities.
In summary, fee protection insurance offers cost savings by covering professional fees during HMRC enquiries, providing access to consultative support, and ensuring full recovery of accountant's fees without the need for negotiation.
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Peace of mind
Fee protection insurance can provide peace of mind for both accountants and their clients. It covers the costs of an investigation by HMRC, which can be triggered randomly or due to suspicious activity. HMRC uses sophisticated IT systems and AI to spot unusual activity, errors, high-risk industries, trends or changes. Being the subject of an HMRC enquiry is stressful, and the costs of an investigation can be significant, with a typical claim for an accountant's time amounting to thousands of pounds.
Fee protection insurance ensures that you do not have to worry about these large fees, as they will be covered by the insurer. This means that you can relax and carry on as normal, knowing that your accountant's fees will be taken care of. It also removes the need to ask clients for additional payments, which can be unexpected and unbudgeted.
Additionally, fee protection insurance can provide access to experienced claims handlers, telephone advisors, and other support services. It is worth noting that the level and scope of cover can vary, so choosing the right scheme is important. While fee protection insurance can provide peace of mind, there may be drawbacks, such as the time and effort required to make a claim, and potential issues with insurers increasing premiums over time.
Overall, fee protection insurance can offer valuable peace of mind by covering the costs of an HMRC investigation and providing access to additional support services. However, it is important to carefully consider the specific details and potential drawbacks of any insurance scheme before deciding if it is worth it for your particular situation.
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Random HMRC investigations
Fee protection insurance is a type of insurance that covers the cost of accountancy fees incurred by your accountant in the event of an HMRC enquiry or compliance check. This can include a VAT enquiry, a dispute, or a random investigation. HMRC has the power to investigate any business or individual at any time, regardless of whether or not they have discovered evidence of incorrectly paid tax or of allowances wrongly claimed. Random checks can be carried out at any time, whether or not errors have been made in accounts or tax returns.
The cost of accountancy services during an HMRC investigation can be significant, even if no additional tax is owed at the conclusion of the investigation. Fee protection insurance can provide peace of mind and help reduce stress by covering these professional fees. Some fee protection insurance policies also offer access to tax helplines, which can provide valuable support and guidance during an HMRC investigation.
However, it is important to carefully consider the terms and conditions of fee protection insurance policies before purchasing. Some companies may try to take over the conduct of the investigation and close it as quickly as possible to minimise their own costs, rather than defending the taxpayer's position. The claims process for fee protection insurance can also be time-consuming and may require a significant amount of information. Additionally, insurance premiums may increase after making a claim, which can be a disadvantage for those who have never needed to use the insurance.
When facing an HMRC investigation, it is important to stay calm and cooperate with the process. HMRC will typically initiate contact by sending a letter with questions about the enquiry. They may request to see accounts and tax information going back four to six years, or up to 20 years if they suspect deliberate tax evasion. During the investigation, a team from HMRC will audit your accounts and may ask to visit you in person at your home, business address, or accountant's office. It is recommended to seek professional advice and guidance from an accountant to ensure your accounts are in order and to minimise the risk of triggering an HMRC investigation.
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Quality of cover
The quality of cover provided by fee protection insurance is an important consideration when deciding whether to purchase such a policy. While fee protection insurance can provide valuable peace of mind and protect against potentially significant costs, the level and scope of cover can vary between providers, and there may be limitations and exclusions to be aware of.
A key benefit of fee protection insurance is that it covers the cost of accountancy fees incurred during an HMRC enquiry or investigation. This includes the cost of defending, investigating, and responding to the enquiry, which can run into thousands of pounds. Some policies may also cover the cost of compliance checks and VAT enquiries, although it is important to carefully review the terms and conditions of any policy to understand the specific inclusions and exclusions.
The quality of cover provided by fee protection insurance can also depend on the experience and expertise of the insurer's staff. Some insurers, such as Vantage Fee Protect, pride themselves on having experienced staff who can provide the best possible service to their clients. Others, like Markel UK, offer a limit of £125,000 for any individual indemnity claim, demonstrating their commitment to providing comprehensive financial protection. It is worth noting that some companies have been criticised for trying to minimise costs by quickly closing down investigations without adequately defending the taxpayer's position. Therefore, it is important to research the reputation and track record of any potential insurer before purchasing a policy.
In addition to financial protection, fee protection insurance can also offer access to additional resources and support. For example, some policies include access to tax helplines, digital solutions, and consultative services. These additional benefits can provide valuable assistance and peace of mind beyond the purely financial aspects of fee protection.
When considering the quality of cover, it is also essential to evaluate the long-term value of the policy. While the initial premium may seem attractive, there is a risk of insurers increasing the cost over subsequent years. Therefore, it may be worth considering partnering with an insurer that offers consistent pricing and extended services to foster a long-term relationship.
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Claim approval process
Fee protection insurance is an insurance product that covers the cost of handling HMRC investigations into a client's tax affairs. It is designed to provide peace of mind and protect individuals or businesses from unexpected costs, which can run into thousands of pounds, even if they have done nothing wrong.
The claim approval process for fee protection insurance typically involves the following steps:
- Filing the Claim: The policyholder must file a claim with their insurance company, providing all the necessary information and documentation. This should be done as soon as possible after the insured event occurs, and there is usually a time limit for filing a claim, which can vary depending on the jurisdiction and the type of insurance.
- Acknowledgement by the Insurer: The insurance company has a mandatory deadline to acknowledge receipt of the claim and begin processing it. In some places, this deadline is 15 days from the date of filing.
- Investigation: The insurance company conducts a thorough investigation into the claim. This may involve analysing years' worth of accounts and other financial information, as well as interviewing the policyholder and any relevant third parties. The investigation period typically has a time limit, which is often also set at 15 days.
- Determination: After the investigation is complete, the insurance company makes a determination on the claim. They decide whether to approve or deny the claim based on the findings of their investigation. This step should also be completed within a specific time frame, which may be towards the end of the second 15-day deadline from when the claim was filed.
- Notification: The insurance company notifies the policyholder of the decision on their claim and provides the reasons for their determination. If the claim is approved, the insurer must send payment to the policyholder within a specified time frame, which is typically within 5 days of approval.
- Appeal or Extension: If the claim is denied or delayed, the policyholder may have the option to appeal the decision or request an extension of the processing time. This may involve seeking legal advice or assistance to ensure their rights are protected.
It is important to note that the specific claim approval process can vary depending on the insurance company, the jurisdiction, and the type of fee protection insurance policy. Therefore, it is essential to carefully review the terms and conditions of the insurance policy and seek clarification from the insurer if needed.
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Frequently asked questions
Fee protection insurance, also known as tax investigation insurance, covers the cost of professional fees incurred in dealing with an HM Revenue & Customs (HMRC) enquiry or compliance check. This includes accountancy fees and costs incurred by an accountant in the event of an unexpected HMRC VAT enquiry or dispute.
The biggest benefit of fee protection insurance is the cost saving it offers. It can cover the cost of tax compliance investigation bills from your accountant, providing peace of mind and protection from facing a large bill. It also ensures that you and your accountants will be able to defend a tax enquiry fully, without worrying about large fees. Additionally, some fee protection insurance providers offer access to a free tax helpline and other support services.
One potential drawback of fee protection insurance is the time and effort involved in applying for and making a claim. The information required to make a claim can be extensive and time-consuming. Additionally, there is a risk of insurers increasing premiums over subsequent years, which may not provide good value for money in the long run. It is important to carefully consider the level and scope of cover offered by different providers and choose a scheme that meets your specific needs.
