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Alternatives to fee protection

At present we use Abbey Tax for fee protection on a client decide basis.  This is expensive for the client but comes at no risk to us in collecting money from the client to cover the cost (as would be the case for all client cover).

As the cost is quite high for the small business a lot of clients will not take it out. Is it possible to charge a small fee of say £30 to each client which would cover any investigations by HMRC? We would then not charge for anything further should HMRC come knocking. I've  looked on ICAEW website and it seems to suggest that we would be offering an insurance product and therefore cannot be done. 

I don't agree that it is insurance product but also want to make sure everything is 100% correct.  Surely there would be no difference to a practice deciding that the annual fee for accounts would have the added value of covering any investigation that could be launched?


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By neileg
28th Feb 2012 15:26


Whether or not the ICAEW think this is insurance, you are exposing yourself to potentially unlimited risk. You would have to have pretty watertight agreements to make sure you don't end up having to fund barristers fees etc if that's what the client needs. It might well be that £30 per client looks pretty small beer if you end up with a complex case. I don't think I'd want to take this gamble.


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28th Feb 2012 15:36

Old chestnut

Sooner or later, every small practice that offers fee protection insurance starts pondering along the lines of "I have been offering this insurance handing over £10k to the provider for three years and can count on one hand the number of enquries I have had. Surely I would be much better off not paying the premium and keeping the cash...".




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28th Feb 2012 15:40

I agree

Although the ICAEW knows better, I agree with your statement.  If your engagement for services covers preparation of the accounts/tax return plus dealing with any HMRC enquiries for a fee of £x (which includes the £30 you mention) then where is the insurance product?  That seems like a normal contract for services to me.

The FSA factsheet ( defining a contract of insurance is entirely useless.

Ultimately I think you would need a lawyer's opinion on the matter, and I expect the ICAEW have already done this and concluded that it could be regulated.  Therefore, it seems like it's just not worth the risk for a small practice.

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28th Feb 2012 16:01


I think the Federation of Small Business offers cover as part of their annual fee. I see it as a way of the client getting the cover without me having to be an intermediary or principal. I believe there are other useful benefits included, though I may be wrong.

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By farm5
28th Feb 2012 15:58

Federation of Small Businesses

If they join FSB they get tax investigation provided by Abbey in their subscription.


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By djn24
28th Feb 2012 16:04

I spoke to Abbey tax about this FSB cover.  They said that it is a less comprehensive product and that abbey tax would deal with the enquiry and not the clients accountant.  Quite useless for us as a firm as we would either have to charge the client for the work to pass info to Abbey tax or not get paid for the work.

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28th Feb 2012 16:29

I have wondered about this point myself

How is it any different to quoting a fixed fee for a job without knowing exactly how long it will take? Is it not just a small step from there to saying you will deal with any HMRC correspondence arising from the return?

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29th Feb 2012 09:54

Abbey Tax

zarathustra wrote:

How is it any different to quoting a fixed fee for a job without knowing exactly how long it will take? Is it not just a small step from there to saying you will deal with any HMRC correspondence arising from the return?

Agree entirely. I've never bothered with insuring my clients (or myself) against enquiries and suspect the company concerned have made a fortune out of this in recent years due to the probable paucity of such events. My fees cover the hidden overhead of dealing with enquiries at a notional loss since  I invariably undercharge for the odd investigation that occurs. Rather than receive objections from clients for the additional cost, I find that they are always pleased that their accountant is able to deal with these matters without recourse to third party assistance and in most cases with no additional tax payable.

I think I'm right in saying that the Institute and Association have decreed that clients should be made aware of the opportunity to purchase such products? This seems just another reason for my non-membership of these bodies.




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By djn24
29th Feb 2012 10:29

Including enquiries in the annual fee

It seems to me that Institute are saying that this is not alllowed as you are then offering an insurance product by doing this.  I personally think you should be able to run the practice in this way if you are happy to not charge for enquires. But then if our annual fee is increased by a notional amount to include the chance of enquiry that is not acceptable.


Can't win. If we charge clients for the enquiry they will be very upset at the cost. They won't pay high insurance fees to cover it and we can't charge say £20 to all clients to cover it either.

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If you think clients will pay £30 a pop and are happy to administrate it, then why not just get a practice policy? 


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28th Feb 2012 16:49

Self-cover IS Insurance

and is therefore a regulated product.  It's even used as an example in the FSA handbook.


Sorry guys.

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Definition of a contract of insurance

The case of Prudential Insurance v IRC identified three essential elements to a contract of insurance:

A fee (or "premium") is paid to one party ("the insurer");The party paying the "premium" (the "insured") is indemnified against a loss from an uncertain event (the enquiry); andThe "insured" must be the party that will suffer the loss (by being charged huge fees for dealing with the enquiry) arising from that event (the insurable interest").

I can't see how what you're proposing is anything other than a contract of insurance.  I agree with Dave.

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Glorious precedent

What djn24 suggests is one of the servies offered by the infamous Christopher J Lunn  & Co:

Of course, they aren't members of a CCAB body.

Perhaps you could just suggest that your clients join the FSB?

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29th Feb 2012 13:09


Ladies and gentlemen, please go back to my original comment and Georges follow up.

We all work on a daily basis with tax law, so presumably are aware that on occasions the law is neither fair nor sensible.  It just is what it is and in our professional capacity - with or without CCAB membership - it is our responsibility to work within it.

Don't throw bricks at the ICAEW or ACCA.  Check out the FSA handbook at and look at example 6 "tax investigation schemes".

The ICAEW don't think this is insurance.  They know it is.  All they are doing is understanding the law and recommending that we, as unregulated service providers, offer such insurance wrapped up in a service if we and our clients so wish.

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