i am looking into providing tax insurance for clients. At the end of the day I do not want to spend hours of admin time on this. Whats the practicalities in terms of work involved for the accountant? How do insurance companies quote for this? e.g. is it based on number of clients the firm has? I note that Croner have two options whereby you either become an incurance imtemediary or not. What are the parctical differences between these and does it affect the fee quote. how do you work out what to charge clients e.g. Ltd Co, directors, sole traders, landlords etc etc. I appreciate this topic has been covered before but couldnt find anything recent.
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Have clients asked for this? Are you going to charge them or include this in your fees?
I would get a quote for the whole practice to help you decide.
When we offered it to clients then the take up was very poor so we insured on a client by client basis (rounding up the premium to the nearest 10 pounds for each type). There is admin but we use the complementary advice lines so this makes it worthwhile.
We do it
First year took a very long time, that 15 years ago
We were doing individual insurances at the time
Strongly recommend against that as admin time burns up any benefit unless you have people with nothing to do
However we are in February so best time of year to do to it.
We insure all clients. That way a massive admin burden goes away
Not just dealing with telling the provider who joined, but you can be more flexible on pricing.
But more critical is that you deal with your insurance, otherwise your client the policy holder needs to agree everything you do and agree the fees involved.
We do not claim on policy for client who choose not to join in
ICAEW is very clear that you cannot double charge, no matter what the salesman says
We operate with a fixed 4 layer price structure, based on the original structure from the original supplier
We consider it a service to client, but one which pays us for the time administering it
We receive from clients more than we pay the insurance company
We charge VAT on our fee for the enquiry service
You need to charge significantly more than the trade memberships that include this for free
The service from those trade memberships is not the quality that you will provide.
If you are regulated by an Accy body you must comply with the rules of the organisation. They will ask and check that you comply on every visit.
http://www.copperfieldptsltd.com/fee-protection
May be a useful resource.
Let us know how your research and deliberations progress.
There is a big admin difference between policies that require the client to pay the VAT (where registered) and those that don't. The trouble with getting the client to pay the VAT is that you have to send an invoice to the insurers for the net and the same invoice to the client for the VAT, so you chasing/allocating two payments for each fee.
Croner/Taxwise has a policy that allows the invoice to be sent to them, with no VAT (as it is deemed compensation), which saves time. Others also offer this, but check what you are getting.
There is a big admin difference between policies that require the client to pay the VAT (where registered) and those that don't. The trouble with getting the client to pay the VAT is that you have to send an invoice to the insurers for the net and the same invoice to the client for the VAT, so you chasing/allocating two payments for each fee.
Do you make a lot of claims ?
I had forgotten that
That is another reason to insure all and keep all between you and insurance company
We have gone down the firm wide route, adding X to each clients fee. It's far cheaper, requires a lot less administration and your services can be supplied on a so called protected bases.
Offering it to clients and giving them the choice tends to lead to a low take up, a lot of administration on your part and the cost to the client tends to be quite a bit higher.
I might be tempting fate here... but apart from clients who have come to me for advice when they already in an investigation my firm has never had an investigation is all its 45 year of trading but I feel that all accountancy firms should have a policy.
When this subject has been discussed previously on Accweb some accs took great delight in saying that they make a lot of money out of charging clients for such insurance.
It is expensive to do it on a client by client basis so we have a block/ firms policy that my firms pays for and then charges each client. I charge a nominal sum for those clients who are most likely not have an investigation and 'weight' those who might (e.g those with lots of entries not ones I think might be hiding things!).
I make the total so I cover the premium and then a bit more so in reality it doesnt cost me anything and as a bonus you receive a very good support advice line (I'm with Croner) which is effectively free to the firm.
when I took on the policy I asked all clients if they wanted it and only a couple said no. New clients are asked when they are taken on as well - none have declined as I have made the cost relatively low.
I left Croner last year. I found that the advice line quality had deteriorated. If you go back 5+ years the phones were manned by experts. Now they seem to be manned by non-experts who look up your query in a Croner reference database. If you want to speak to an expert they now call themselves consultants and you need initiate the claims process to have access to them. I was forced to initiate a claim (whereas otherwise I wouldnt have bothered) and then Croner refused to meet the claim as they said the client had been done for the same thing on a vat inspection 5 years previously. Ended up in a bit of a bun fight and I bailed. Glad you find the helpline good. My experience was less positive.
It surprises me that anyone wants this. I don't offer it, and no client has ever asked about it. The only full investigation a client of mine has ever had was as a result of a mess left by the previous accountant (who had gone bankrupt and was struck off). The occasional aspect enquiry (usually dealt with in a letter or two) is the only thing that has arisen on my watch.
I used to think that too until I lost a couple of prospects because I didn’t offer fee protection.
I have a client decide policy and there is a lot of admin.
I found take-up really high, though, prob about 60% of my client base, which was surprising because interest had been minimal when I had previously mentioned it. I would like to think it’s because I really invested time in year 1 in selling the product.
I also charge quite high, between 2 and 3 times the cost to me. That’s to cover the admin and also make it a decent profit centre for me (but then I don’t go down the “we offer a quality service and that justifies higher fees across the board” approach and prefer to charge by service).
Amazed people do this... it’s more profitable for insurance companies than the extended warranties sold by retailers.
In 20 years of my own practice only had 1 existing client subject to a full enquiry.
Never had a client ask for cover.
If your client needs this insurance cover you should perhaps consider if you should be acting for them.
Since every single one of my clients is potentially exposed to an HMRC enquiry should HMRC see fit to open one - spurious or otherwise - are you suggesting that I should have no clients?
Since every single one of my clients is potentially exposed to an HMRC enquiry should HMRC see fit to open one - spurious or otherwise - are you suggesting that I should have no clients?
Insurance is about probabilities. I haven't thought it remotely probable that any of my clients would be involved in an enquiry of some kind for the last 20 years. It's the way HMRC work these days.
We don't offer it as a firm. About 5-6 years ago we surveyed clients and asked who would be interested on a no commitment basis, the interest was really low, less than 20% I'd say. As a small firm it just wasn't worth us going forward with it.
I do advise all clients to add it to their business insurance though, or join the FSB.
I have had one full enquiry with a client in my first year of sole practice mid 2000s, he was insured through his business insurance which was fortunate as it was a lengthy and time consuming investigation involving my fees and those of a tax investigation specialist (ending in no adjustments). I tell new clients his anonymised tale. Truth be told, it was a great learning experience for me.
Otherwise I have had a few aspect enquiries and one other full enquiry in the last 15 years. Thankfully the full one was closed after initial provision of information so wasn't costly at all (and I had previously advised them about tax investigations insurance but they had declined to take it up so I was in the clear).
In my experience, for the very small firm it is costly and most clients don't want to pay.