Do you need Fee Protecion Cover Insurance?

Fee Protection Insurance

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I am currently reviewing my fee structure and am thinking about offering Fee Protection Cover to clients. This is something I have offered on and off over recent years, but currently don't as the take-up has been poor and the premiums paid to the insurer are too much to warrant the current risks of investigation.

My question is, could I offer Fee Protection Cover as a service without "re-insuring" with someone like Croner Taxwise? I would just offer it as a fixed fee added to the client's monthly or annual bill and then would just assist the client "for free" when and if an investigation or enquiry arose. Or is there some legal requirement that if offering this, I need to have insurance with a third party such as Croner Taxwise?

Replies (20)

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RLI
By lionofludesch
20th Jun 2018 12:47

I've never really considered Fee Protection Insurance.

The enquiries I've had in the 20 years of Self Assessment (and 20odd CTSA) have been completed at a cost of a few hundred at worst. I just bill them for what time I spend.

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Replying to lionofludesch:
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By andy.partridge
20th Jun 2018 18:29

Gosh, time based fees. How very last century ;)

I find a big advantage is that there need be no dialogue about additional fees.

Yes, often the work that is covered might take a few hours, but I had one last year that took 30 hours of my time. It was worth it for this client but with some clients short of cash, fee conscious and under pressure the relationship risks being impaired.

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By Matrix
20th Jun 2018 13:41

Firstly offering insurance is a regulated activity. Secondly, what if there is an investigation which goes on for years? You would lose out.

If you already know the take up is poor, I don't see how this would be a money spinner.

We offer it but very low take up and loads of admin. I use the helpline so it is worthwhile. I have never had to claim.

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Replying to Matrix:
RLI
By lionofludesch
20th Jun 2018 15:02

So why are you doing it, Matrix ?

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Replying to lionofludesch:
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By Matrix
20th Jun 2018 15:14

Since some new clients have it with their former accountant it is good to offer it.

We only have about 5 clients with cover yet we get the helplines so it is worthwhile as already mentioned.

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By ireallyshouldknowthisbut
20th Jun 2018 14:26

@Phil, why dont you just get practice cover?

They way everyone is in the scheme, and you split the fee as you see fit.

it should work out much cheaper than the exhorbitant standalone products on offer, which as you say would have very low take up. Ours is high 90%+ of people its offered to, I don't offer to people for whom it would be no use.

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Replying to ireallyshouldknowthisbut:
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By Phil Marshes
20th Jun 2018 14:33

That's what I used to do. The last insurance policy I had for fee protection cost £1200 per annum. For that to make economic sense, I would have to spend at least £1200 of time on investigations each year. I don't spend that amount of time in 3 years . ..

..and that's my point, by offering it aren't you then performing an FCA regulated activity?

Croner Taxwise sell it as an opportunity to increase fees, but again, unless you have it as an overhead aren't you then performing an FCA regulated activity?

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Replying to Phil Marshes:
By ireallyshouldknowthisbut
20th Jun 2018 15:21

The ICAEW said it wasn't a regulated activity to charge a fee for an insurance backed tax investigations service.

But I imagine if you offer it yourself it might be....

The "sense" is not that you might only recover £400 a year in fees, is that your clients pay you £1,200-£1500 and if "bad things happen" you don't get stuck with a £10,000 of fees from your own hand.

Its insurance, of course the insurance co. will win long term or they would quickly go bust.

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Replying to ireallyshouldknowthisbut:
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By Phil Marshes
20th Jun 2018 15:32

Having asked and talked around, I think you are right. It's having the insurance-backed service from someone like Croner, that means you shouldn't fall foul of FCA regs.

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By Maslins
20th Jun 2018 15:39

My understanding of it is it seemed more a perk for the accountant than the client.

You'd pay the insurer (say) £50 per client per year, charge the client (say) £200 per client per year, immediate profit for you...and whilst perhaps ethically questionable, you're not getting a commission/kickback, just marking up a cost, so doesn't need to be specifically reported to the client.

Then a client has a claim. It takes you an hour to deal with, and you tell the client how lucky they are that you're not charging them for this. You tell the insurer it took 5 hours and your charge out rate is £200/hour. £1k receipt for you.

We don't offer it, we just take enquiries on the chin, helping for nothing beyond our normal fixed fee. We don't get involved in anything contentious, so normally enquiries are just providing copies of a few bits and bobs, or us replying "oops, the client didn't tell us about that P11D, but agrees it's accurate".

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Replying to Maslins:
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By andy.partridge
20th Jun 2018 16:33

[***] hell. You're advocating casual insurance fraud.

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By andy.partridge
20th Jun 2018 16:25

Let the client decide. Croner Taxwise offer this for your practice so there is no risk to you of a low take-up.

Some clients are more risk averse than others so it is entirely appropriate to give them an option they can refuse or agree to.

What would your clients prefer - to pay an extra £100 a year knowing they were protected or run the risk of being billed for an unspecified amount just when they are feeling vulnerable?

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Glenn Martin
By Glenn Martin
20th Jun 2018 17:04

I have a practice wide policy, which I was 50/50 about renewing, but I did as got a good deal but not had a claim.

The clients with staff like the helpline access for HSE and Legal stuff.

I include £75 per client for this, making a small profit.
I suspect under MTD there will be more aspect inquiries so probably worth having, as Maslins mentions if you client gets pulled for something you fully recover your fees wihtout going back to your client so your fixed fee is exactly that.

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Jennifer Adams
By Jennifer Adams
20th Jun 2018 17:41

If I may say so I dont think you are looking at this the right way.
In all my 20 years in practice (and my father's practice 30 years before) I have never ever had an investigation. I've had one or two 'are you sure this figure is right' but nothing else (prob tempting fate here!)
Therefore I didnt see the need for insurance but with MTD on the horizon I thought I'd have a look.
The value of having such insurance is not in the fact that the client is covered for your fees -the value is being able to ring up Croner and get specialist advice for free - immediately - no hanging around. It doesnt matter how technical or basic the question is - there is always someone there who knows the answer.
I have a practice policy. I dont offer to clients individually but add a bit on the fee for each. Obviously I ask them first before adding on the invoice. The amount is based on their fee and poss higher for those clients who are more likely to be looked at by HMRC due to the complexity of their affairs. If they dont want the cover then it doesnt matter - they are covered anyway as it's a practice policy.
But I make sure that the premium covered - so I am getting Croner's tax advice for free.

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Replying to Jennifer Adams:
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By Phil Marshes
20th Jun 2018 17:42

After kicking this around with a few people today, I have come to the same conclusion: bake an element into the fee and sell it as a "freebie".

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ALISK
By atleastisoundknowledgable...
20th Jun 2018 17:49

Jumping onto this thread, who are the best and/or cheapest providers that people can recommend?

I don’t offer it at the minute, but maybe something to look at.

Thanks

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Replying to atleastisoundknowledgable...:
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By Matrix
20th Jun 2018 19:27

We used to be with Croner Taxwise but they quoted a minimum fee this year which would have resulted in a loss (or marketing the cover to our clients which we didn't want to do).

We are with QDos, about 5 clients recharged at cost and get the helplines thrown in.

We don't insure the whole practice since most of our clients did not want the cover.

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By marks
20th Jun 2018 23:19

We are with PFP on a practice wide basis and pay £3k per year. (just moved to them from Croner in January before the underwriting issue kicked off so probably will move back to Croner next year)

We offer it to clients at

£2 per month for tax return only
£3 per month for sole traders
£4 per month for partnerships
£5 per month for Ltd Companies

Have about 95% take up or about 200 clients take the cover.

We earn about £7k from the recharge plus are covered for our enquiries.

Have usually 2 - 4 enquiries per year and average cost of them is about £800. (mainly have VAT enquiries)

So between enquiries and recharge we make about £9k per year, costs us £3k plus we get supporting with marketing and free tax helpline.

Really a no brainer for us.

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Replying to marks:
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By Phil Marshes
20th Jun 2018 23:22

Very useful. Thank you.

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Replying to marks:
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By Phil Marshes
20th Jun 2018 23:22

Very useful. Thank you.

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