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Is fee protection insurance worth it?

Do you have fee protection insurance?

Didn't find your answer?

My recent experience with fee protection insurance providers making me question the value of having fee protection insurance. 

I have had a few investigations. In the main all gone in our favour. I am questioning the value of fee protection insurance for the following reasons:

1) The time it takes to apply for approval for the claim

2) Info required to make the claim. Also, the time taken up in making the claim. 

3) In my case the hours of input exceeds the hours of the claim providers agree. 

Do you have fee protection insurance? If not, why not? If yes, why yes. 

Thanks

 

Replies (42)

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By andy.partridge
08th May 2019 20:26

Yes.

I consider it an important offering to clients, regardless of whether or not they take up the offer.

I have had no problems with claims.

I use Croner Taxwise. Who do you use?

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Replying to andy.partridge:
bike
By FirstTab
08th May 2019 21:30

Hi Andy

I was with PfP, terrible experience. They took months to respond to my concerns. Their response was such a copout to get out of their mess.

Currently with Croner Taxwise. They are better. Like all insurance, premiums shoot up when a claim is made making me question why bother with all this. They get you one way or another. Best to save nearly £2k of my premiums a year.

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Replying to FirstTab:
Psycho
By Wilson Philips
08th May 2019 22:09

Why are you not passing on the cost of the premiums to your clients?

And if it’s taking too long to submit a claim that would suggest that your record-keeping needs looking at.

And while it is true that a number of claims might affect premiums, one claim should not cause them to “shoot up”.

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Replying to FirstTab:
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By andy.partridge
08th May 2019 22:23

There is a commercial reality to consider here. They are a business and they want to make a profit out of you.

Perhaps you make more claims than average, perhaps each claim is for a higher amount than average. Perhaps they consider your clients to be higher risk. Why not ask them?

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By Glenn Martin
08th May 2019 23:06

If you are unhappy with the process and the companies you are dealing with why don't you self insure.

Charge all of your clients £75-£100 each. to cover the cost of any investigation.

If you don't have any you have clicked all the money if you get one in say 100 you will have £10k on account to deal with it.

I use Taxwise and have a practice wide policy, I include it at cost to my clients I maybe should mark it up to squeeze a bit more from it.

The system seems easy to use but not actually made a claim yet.

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Replying to Glennzy:
Red Leader
By Red Leader
09th May 2019 11:23

Commercially I think this is a good idea and considered it myself. The snag I came up against was that you are then considered to be an insurer. I could be wrong, though.

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By marks
08th May 2019 23:21

We have all cover with Taxwise. Just raised first claim today for the year for a VAT visit next month (claimed for £800). Couple of hours of my time and 5 hours of manager time.

We charge it onto clients at reasonable rate and have about 90% take up

£2 per month for tax return only
£3 per month for sole trader
£4 per month for partnership
£5 per month for ltd company

We have about 200 clients over half of which are Ltd Cos and we collect in about £9k a year in fees from it.

Our premiums are £280 per month so nice recovery being made.

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Replying to marks:
ALISK
By atleastisoundknowledgable...
09th May 2019 08:00

That is a nice tidy profit. Maybe I should rethink not having it ...

Possibly a stupid question, but do you charge that as 1 annual fee rather than monthly?

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Replying to atleastisoundknowledgable...:
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By marks
09th May 2019 23:45

atleastisoundknowledgable... wrote:

That is a nice tidy profit. Maybe I should rethink not having it ...

Possibly a stupid question, but do you charge that as 1 annual fee rather than monthly?

Most of our clients pay monthly by DD (about 80%) so is just part of the monthly payment

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By ireallyshouldknowthisbut
09th May 2019 09:38

Its insurance

They will always win.

I have all client cover but bill it separately as a small charge like Marks does. If a client is not paying up (about 90-95% do) , I bill them if they have an investigation, and the insurance co, so I effectively get double bubble.

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By Maslins
09th May 2019 10:03

From discussions I had it didn't sit well with me. Seemed the consensus was you recharge the insurance to clients at a hefty markup. Selling it to them as for their benefit, when in reality it's for the benefit of the accountancy firm.

Tidy profit on reselling the insurance, milking any situation where a claim might be required.

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Replying to Maslins:
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By andy.partridge
09th May 2019 10:19

That's not my experience.

It's your choice. I add around 10% to the cost to cover admin time in the annual renewal set-up (you can't avoid it) and there is some admin time associated with claims.

That said, the cost to the client is still only a small percentage of their annual fee.

At the end of the day it's insurance, and a lot of people have insurance fatigue - you can't even buy a kettle these days without someone trying to sell you a 3 year warranty on top.

One of my top reasons for doing it surrounds client relationships. A client will be [***] off they have an enquiry. Saying they will need to stump up £X for you to help them with it, and up-front, please, isn't pleasant for either party.

Much better to be able to say, 'Sorry about the bad news, but at least that £100 you spent on insurance means I can concentrate on helping you without it costing you a penny more in fees.'

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Replying to andy.partridge:
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By Maslins
09th May 2019 11:10

Horses for courses.

I guess we're relatively low risk (with exception of an IR35 enquiry, of which we haven't received any...yet). Inevitably we get a few HMRC queries. Most commonly something like a client said they didn't have a student loan, turns out they do. We deal with that for no additional fee.

We don't charge on a time basis, so I imagine clients would be miffed if we did charge them lots extra due to HMRC asking questions. Maybe we've just been lucky to date...I guess if we had a particularly nasty enquiry that looked like it would take a LOT of time, we'd discuss with the client then.

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Replying to Maslins:
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By andy.partridge
09th May 2019 11:18

Oh Maslins . . . if only I wasn't busy . . . .

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Replying to Maslins:
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By andy.partridge
11th May 2019 12:55

Maslins wrote:

I imagine clients would be miffed if we did charge them lots extra due to HMRC asking questions..

The questions aren't the problem, it's the answers.

Now if you want to take the moral high ground you could always offer it for free. You are in control of the pricing.

You say you would discuss a 'nasty enquiry' with the client. Of course you would, but what will be the outcome? Just how nasty it is might only emerge when you are in the middle of it. Either you are going to add to the cient's stress by charging them or you are going to feel resentful if you don't.

Low cost insurance magics away the issue. We operate on a 'client decides' tariff with the insurer. It's there if they want it but certainly not mandatory. Offering something they can choose to take up or not is surely a benefit. I would go as far to say you have a professional duty to offer it.

So, no it's not a glib 'horses for courses' at all.

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Replying to Maslins:
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By Roland195
09th May 2019 13:05

I agree with this. I dislike the literature that is produced to scaremonger clients into taking up a policy that is unlikely to benefit, with the figures being quoted in support of this utter rubbish both in terms of frequency/likelihood of enquiry and the resulting cost.

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RLI
By lionofludesch
09th May 2019 10:36

The companies I would avoid are those which want to take over the conduct of the investigation. They'll close it down as quickly as possible as they've no real interest in defending the taxpayer's position. They just want to cut down their own costs. The easiest way to do this is to give in straight away.

I had one of these back in the 1980s. They said the client's books weren't good enough (not that they'd seen them - they were just going on what HMRC said) and our best option was to agree to HMRC's assessment of £5000 + penalties. I took the case back and agreed no addition to profits. Fee £350. Insurance company still wouldn't pay out on my fees, insisting they were right. Sharks isn't the word for these people, I'm afraid.

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By AccSec
09th May 2019 10:41

From memory if you take out Fee protection insurance, you get free tax helpline too. I understand some these tax advise helplines are really good. Is that still correct ?

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Replying to AccSec:
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By marks
09th May 2019 23:48

AccSec wrote:

From memory if you take out Fee protection insurance, you get free tax helpline too. I understand some these tax advise helplines are really good. Is that still correct ?

Yes you get tax helpline support with Taxwise. We probably use them about 40 -50 times over the year.

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Jennifer Adams
By Jennifer Adams
09th May 2019 11:52

My firm has been going for over 40 years (no... not just me but partners before) and we have never ever had an enquiry (touch wood!)

But I took out the Croner Taxwise practice policy because... its insurance ie you prob wont need it but it only needs one client!

I ask the clients whether they want it and charge those that do extra (weighted towards those larger more complex clients) but just so that the total covers the premium paid by the practice. I dont like the idea of making money out of something that will, in all probability, not be used. So long as I cover the premium then I get the bonus of free tax advice and I'm happy. I've contacted Croner's advice line a couple of times and that advice has been quick and invaluable (EU VAT not being my thing).

In addition I've noticed that clients who are coming to me from larger high street accountants are being charged hundreds of pounds for investigation insurance and that is one of the reasons for their leaving.

If you look at other previous posts on this subject you will find that some accountants seem to take pride in turning this insurance into extra income.

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Replying to Jennifer Adams:
Red Leader
By Red Leader
09th May 2019 13:06

Blimey, not one enquiry in 40 years!

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Replying to Red Leader:
7om
By Tom 7000
14th May 2019 18:31

That's lucky

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Replying to Tom 7000:
Lone Wolf
By Lone_Wolf
15th May 2019 09:16

Dare I say, it's almost unbelievable.

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Replying to Jennifer Adams:
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By marks
09th May 2019 23:52

Jennifer Adams wrote:

My firm has been going for over 40 years (no... not just me but partners before) and we have never ever had an enquiry (touch wood!)

Can't believe this unless you dont have any VAT registered clients.

HMRC conducts VAT visits every 4 -5 years on average and is mostly what our enquiries are.

We probably have 4 enquiries on average over the year and 3 of them tend to be VAT related.

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Replying to marks:
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By Maslins
10th May 2019 09:03

Guessing maybe it's interpretation of what counts as "an enquiry". Perhaps Jennifer isn't counting the little ones where HMRC have some info from elsewhere that contradicts what accountant/client has submitted, 10mins checking, then an agreement reached.

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Replying to marks:
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By andy.partridge
10th May 2019 09:41

marks wrote:

HMRC conducts VAT visits every 4 -5 years on average

Not since the 1990s

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By busacrun
09th May 2019 13:31

we're with QDOS vantage, or whatever they are called now, couldnt be happier, they send out all the renewals notices and administer everything, we just have to make claims

to date all claims have been settled without any fuss, only one which was rejected as it turned out the clients cheque for the premium had bounced and they weren't actually covered

we add a modest mark up on the premiums, and we do it on a client opt in basis - if they don't opt in and take cover, the client gets billed for any extra work.

I really view this type of insurance as a duty of care offering from our firm, we advise clients of the benefits, but let them know its up to them to decide if they want it or not

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By Matrix
10th May 2019 07:04

We only have about 5 clients covered as the take up was so small, it tends to be the ones who had it with their previous accountant so we felt we had to offer it.

We were with Taxwise but now Vantage as Taxwise had a minimum. Both tax helplines have been great.

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By Glenn Martin
10th May 2019 13:01

I include it with fees so that your fixed fee is exactly that, so in the event of an enquiry there would be know extra fees to pay to us.

Smaller clients like the security that brings and often comment "that was an extra £150" with my old accountant. The cost per client is quite small so I just cover the cost plus admin like Andy Partridge.

I have a few hospitality clients that if they get looked at can take some time to sort out and you cannot avoid charging on hourly rates really.

No enquiries in 40 years, you need to push the term reasonable deduction more.

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Jennifer Adams
By Jennifer Adams
11th May 2019 10:44

I see Glen charges his clients £75 + ... my subbies could not pay. As I say... I cover the cost and feel happy with just that and getting the excellent Croner advice for free.

I have VAT clients and no.... no enquiries/investigations/visits etc... ever

And exactly the same as Glen - I get clients who have previously been charged £150 +. Personally I think that is daylight robbery but that is for another post.

I've only ever had 1 letter challenging a tax return submission. It was under this recent loan PAYE problem and that was on a client who got caught up in something she didnt know about or understand whilst working for the company for one year. HMRC got her name from doing a full investigation on the company she worked for. I charged a separate fee for completing a 4 page form and ringing to chase why HMRC hadnt come up with a reference number under which client could pay... come to think of it they still havent after a year. Must chase...

I put no investigations down to the fact that my lot wouldnt dare do anything they shouldnt... on pain of death or rather ...a row from me!

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By David Gordon FCCA
14th May 2019 10:46

All insurance is a pain in the backside.
But:
As a sole practitioner, and thereby not being omnipotent, I have subscribed to fee protection for over twenty years. I pay one fee to cover my entire practice.
It is similar to the enormously expensive annual textbooks I used to buy. Mostly and hopefully they sit gathering dust. Then one dark and gloomy morning they save your professional life. Job done.
The company I use have been unfailingly helpful. Yes they are picky, sometimes pedantic, and a pain in the head.
Nevertheless over the twenty years or more, the company has proved itself. I treat them as a valued employee, and someone to talk to.
In my opinion any sole practitioner who thinks he does not need some sort of wicket-keeper is looking in the wrong mirror. Not least because occasionally it has helped me sort some HMRC injustice for which the client could not afford the £fee.

took up fee protection

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By TONY.TONYPOMFRET.COM
14th May 2019 10:56

I think that it is absolutely essential to have investigations insurance. I insure with Abbey Tax, and have done so for very many years. I have a policy which provides for every client business to be fully insured, and client decide for personal clients. All clients are invited to subscribe, and it is arranged such that my practice is not providing insurance and therefore VAT has to be added to invoices to clients subscribing to the service. I aim to just cover the costs of the insurance each year.
Abbey Tax provide all promotional material free of charge to encourage clients to subscribe.
There is no better way of losing a client if an enquiry is opened, and the client is unable to pay the fees. It is a way of ensuring that full charge-out rates are recovered on every occasion.
I don't get many enquiries, but if one occurs there is a very simple on-line claim form, and Abbey Tax pay my invoices very promptly. They have an excellent back-up of ex-Revenue staff to assist in difficult cases, including reviewing and drafting replies. There is also a free advice line.
Any client in business who has not taken up the insurance can then be invited to take up the insurance with my practice if an enquiry is opened.
My longest enquiry was in respect of an Italian Restaurant where the fees topped £8K, in the process of which the Revenue were looking for a settlement in the region of £90K and we ended up agreeing around £16K. The assistance from Abbey Tax was superb.
I cannot recommend Abbey Tax highly enough.

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By pauljohnston
14th May 2019 10:58

We have had fee insurance for many years. I cant remember when but one year we decided to increase our fees and included the cost and have done ever since.

As others have said the help lines are brilliant and worth the cost alone. We have very few enquiries but when they do pop up. Telling the client that the first £100k of our fees are being paid for goes down well particularly if the Tax man is being slow are keeps comming back.

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By David Gordon FCCA
14th May 2019 11:08

Ouch!
any professional who thinks he or she may self-insure is dangerous.
Fees for real tax experts are eye-watering.
Investigations are not the main problem.
it is the HMRC person who believes he or she is Master of the Universe.
I have met a few, not many, but enough to make me wary. To give flavour:
The most outrageous case was when HMRC agreed that an employee's claimed expenses were absolutely "Wholly, necessary, and exclusively", but because the taxpayer did not "Need to earn certain commission to keep his employment" that related part of the expenses was in fact "Not necessary". The tax involved was around £2,000. I had two inspectors travel some 350 miles, to my office to argue the case. (Their expenses were £800!)
If it had not been for the backing of the fee insurer, we could never have afforded to fight and win the case.
Twice I have had to go to court as a witness, in a VAT matter. As a sole practitioner this can £destroy you, if you do not have cover.

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ALISK
By atleastisoundknowledgable...
15th May 2019 09:52

I suspect the answer is “no”, but does anyone know whether fee protection would include accy fees for work & appearance for a legal case, rather than HMRC enquiry?

Specifically I’m thinking about a client who regularly sues or repudiates contracts.

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By David Gordon FCCA
16th May 2019 11:33

to those who kindly commented on my previous notes:-
1)
It may be (almost) unbelievable, but life is stranger than fiction.
Technical point:
As my adviser pointed out, in law the tax man had a case. "Wholly exclusively necessarily" is strictly observed by the taxman. Where the employee is set a target which must be reached in order to retain the employment, then by definition earnings above that target are not Wholly etc for retention of the employment. The employer employed many such managers. I suspect the inspector was trying it on. In any event the thing finally died when we threatened to take this restraint of trade argument to parliament.
For fun I will give you another one:
Upon inspection VAT accused my client supermarket of understating sales. VAT recalculated every supply invoice.
It took nearly two years to force VAT to reveal how they did their calculations.
It turned out they used the suppliers price list and catalogue.
But that list quotes the purchase cost of the goods NET of Vat, and alongside it the suggested retail price Inclusive of VAT. So, VATman's calculation of the gross profit was VAT rate in excess of the true net after VAT profit. Two years total waste of professional time. In truth over the time I have carried fee protection I have had only a handful of these stupidities.
But, as with car insurance:
Thank the Lord I have 42 years without a major prang. This does not mean I should disregard the next drunk waiting round the corner.

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By Bob Hope
06th May 2020 19:34

Such reasonable premiums being discussed here and a bit of margin too. My accountant wants £230pa for a micro Ltd via Croner. I won't pay it as I used to pay £110 a few years ago and they are milking it. The client fees being discussed by professionals here are very reasonable mind. All the policies i've Googled seem geared to sell to accountancy firms and boast of the easy profits. Is there any alternative in going direct with someone? Thanks

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Replying to Bob Hope:
Psycho
By Wilson Philips
06th May 2020 19:55

Bob Hope wrote:
My accountant wants £230pa for a micro Ltd via Croner. I won't pay it

So you won’t complain, I assume, when he charges you several times that amount to deal with the enquiry?
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Replying to Wilson Philips:
RLI
By lionofludesch
06th May 2020 20:06

Will that happen every year?

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Replying to Wilson Philips:
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By Bob Hope
06th May 2020 22:53

Wilson Philips wrote:

Bob Hope wrote: My accountant wants £230pa for a micro Ltd via Croner. I won't pay it
So you won’t complain, I assume, when he charges you several times that amount to deal with the enquiry?

That will have been my choice won't it when faced with making a call on an overpriced product? I don't insure my TV or dishwasher either despite persistent offers to do so... £100 a year for a £500 dishwasher that may well last over 10 years is a poor value proposition. Do you get me...? Same with my caveat ridden dog insurance policy that sgoes up by 10% every year. I think tax investigation insurance will join a monthly £25 savings pot. The dog's pot is up to £4k now and covers EVERYTHING always... Insurers just need to offer value but are milking it in cahoots with my accountant. Bad form in my opinion.

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RLI
By lionofludesch
06th May 2020 19:51

You don't see a poor bookie.

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RLI
By lionofludesch
06th May 2020 19:52

Duplicate

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