Fee protection insurance confusion
It has been stated on this forum that the main accountancy bodies and the FSA consider that any charge made to clients to cover potential accountancy costs resulting from a future tax enquiry, amounts to the supply of insurance and this cannot therefore be offered by non-regulated firms.
Some of our clients have taken up fee protection insurance on a "clients decide" basis but the take-up has been low due to cost. We have been exploring the possibility of insuring this firm and then passing on a (much smaller - even when adding 20% VAT) annual charge to all clients who wish to be "covered". The insurance companies all state that this arrangement does NOT amount to the supply of insurance to our clients and we can charge what we want for this extra "accountancy service", billing separately for it, if we so wish. We would then claim from the insurance company, the time costs incurred in the event of an enquiry.
If we go ahead, the annual premium will be substantial (about five times more than the average annual time costs on enquiries based on our experience of the past ten years), and it occurred to us that we could perhaps make the extra charge to the clients in exactly the same way as suggested by the insurers, but we would not actually take out a policy. We fully appreciate the risks in not having cover but we would be prepared to take that risk.
The fact that the insurance companies are confident that the charge we make to the client is NOT insurance, appears to conflict with the views of the above bodies. Can anyone explain this apparent conflict?
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