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Tax protection insurance

Tax protection insurance

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I have been in practice for almost a year now and am slowly building up a client base. To date I have not gone down the route of discussing tax protection insurance with any clients. I have read numerous articles that suggest it is something that should be raised with clients and that it may be best to leave them with the option to take some cover out as a minimum. I presume others out there have faced this scenario and wonder what the current best practice solution would be.
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By pauljohnston
28th Jul 2008 11:38

I agree with Jonathan....
we have had blanket cover for all clients for 5 + years. Every client is covered.

One hour of my charge out time is greater than the amount that we charge to clients. We use CCH.

For the few enquiries we have had both aspect and full the knowledge that our fees will be covered is a great relief to the client (and us).

It does mean that one is able to argue any point and not having to concede because the client cant afford to pay you.

I would recommend this type of insurance to all.

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By Dave Paveley
25th Jul 2008 16:06

I also read the previous post in disbelief..

"If you don't offer it then might your client go elsewhere?"

No.

"the cost of the insurance is probably less than 1 hour's chargeout rate"

No.

"to read and aknowledge an enquiry letter and discuss it with your client it would probably take 3 or 4 hours"

No.

"I have firms who treat fee protection insurance as a profit-centre and make at least 100% of the block fee"

If I wanted to sell insurance I would get a job as an insurance salesman.

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By vowlesj
25th Jul 2008 15:29

its easy and its good for clients
I have read the previous posts with disbelief!
1 it is very easy to set up
2 as the practice you get to choose if you take out blanket coverage or if you ask the clients individually to opt in or out.
3 it is fairly inexpensive and therefore available to any size client
4 it is good advice for your client - so tell them even if you recommend they purchase it from another source
5 if you don't offer it then might your client go elsewhere?

In my practice we use IRPC/CCH croner. We send out 1 mailshot to the clients asking for cash if they want to opt in (and CCH provide draft letters, etc), field a few phone calls with queries. Any client who takes it up pays upfront, we sent CCH a list of clients and a cheque and everyone is happy. Setting it up in the first place with CCH was a couple of phonecalls and a meeting. If new clients want to take it up during the year they pay a pro-rata amount and CCH give us a scale to work this out with.

I agree that the chance of any idividual client getting investigated is quite small ... the whole idea of any insurance is that you have it in case! But if you are that client and it costs 100+ hours in professional time to resolve the investigation then it will be a lot of money.

When you look at the finances, the cost of the insurance is probably less than 1 hour's chargeout rate. If all you did was read and aknowledge an enquiry letter and discuss it with your client it would probably take 3 or 4 hours - so even just that much work will produce a reasonable cost saving if they were to take the insurance out.

Jonathan

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By MarkRyan
25th Jul 2008 13:46

Insure the practice and automate
I work with many firms of accountants, so see many different views on this...

It's been hinted at in earlier comments, but if you have a decent practice management system, you'll be able to automate the production of the invitations, invoices, reminders etc.

You'll know who are members, who was invited and didn't join and who was invited and told you to never speak of this again!

You'll also be able to control the cash.

I have firms who treat fee protection insurance as a profit-centre and make at least 100% of the block fee

Finally, the vendors are starting to offer a fair degree of admin automation themselves, so speak to them

[email protected]

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Rebecca Benneyworth profile image
By Rebecca Benneyworth
24th Jul 2008 14:28

Yes
I have advised them that insurance is available and if any of them felt strongly about it I might reconsider. I am not concerned to lose the odd client who might want to go elsewhere where they are insured, and some could probably get cover through FSB which I have advised them.

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By Anonymous
23rd Jul 2008 09:17

For Rebecca
Rebecca out of interest do you tell clients you dont offer insurance and suggest they look elsewhere if it is something they might like to insure against? Presumably you bill all clients for Enquiry work?

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Rebecca Benneyworth profile image
By Rebecca Benneyworth
22nd Jul 2008 21:34

But...
My own experience is that after a nasty enquiry you normally lose the client - however hard you have worked (and however much time you write off). My practice is too small to offer this at the moment but if I expanded again I think I would do it anyway.

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By Anonymous
22nd Jul 2008 17:18

Fee protection is a lot of hot air - how can the admin and the costs to the practice, and the client, ever be worthwhile for such a tiny percentage of Enquiry work?

As far as I am concerned the insurance companies in the market have done a fantastic job of scaring accountants witless.

Think about it -

How many Enquiries have you had?
What was the cost to you?

Now compare this to the cost of any insurance cover.

We have all got too used to listening to insurers scare stories.

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By Dave Paveley
22nd Jul 2008 16:02

To quote Nick..

"You'll impress and retain far more clients by being seen to be trying to act in their best interests than complaining about the implications for you."

Exactly.

Hence why I think about their bottom line before my own, and certainly before the insurance company's.

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By mark1975
22nd Jul 2008 13:48

Do you receive good fees for enquiry work?
We offer fee protection to all our clients:

Downsides
1. Admin to do letters– takes a while to do letters (although we do have an auto mail system through IRIS so doesn’t take too long).
2. Admin when cheques come in – need to keep a database so can easily see who’s covered
3. A few clients give little moans – but easily explained on telephone that it is entirely their decision at that you have no axe to grind
Upsides
1. Educates clients that if there is an enquiry then there will be a fee to go with it
2. Add a small mark up and your couple of days admin will be covered
3. Can charge decent fees for those who take out the cover and get paid quickly be the insurer.
4. Can charge reasonable fees to those client who did not take the cover on the basis that they get informed each year that enquiries are possible and fees come with them.

For years we were not receiving a decent return for enquiry work, now it’s not a problem and the clients seem happy.

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By Anonymous
22nd Jul 2008 13:45

FSB
As mentioned earlier, Chambers of Commerce provide it and so do the FSB - OK you need to check for exclusions and you may not be doing the enquiry work yourself (which is worth it for that very reason!), but you are advising clients of it and they are free to take it up if they value it - and depending upon the size of the client's business, membership of the Chamber - or the FSB - may provide much more VFM than an insurance policy.

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By nickja
22nd Jul 2008 13:22

Client first
I had this argument with myself when SA was introduced. I concluded that none of my clients would thank me if they were hit with an extra bill for an enquiry so I purchased a blanket policy. I then wrote to all clients explaining my conclusion and telling them that I would be upping fees by a percentage to cover the costs. Not one client objected.

This isn't about what we want, it's about what clients expect - which is ultimately what we have to do to succeed. You'll impress and retain far more clients by being seen to be trying to act in their best interests than complaining about the implications for you.

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By Anonymous
22nd Jul 2008 11:39

Statistics
Yes, interesting comments, and I am particularly interested in probabilities.

HMRC cut one a quarter of its staff last year and as many offices it seems too. It also worked out that aspect enquiries have the best yields - so in theory, future enquiries should be better targeted and quicker too!

However, following the interventions pilot it also found that interventions are effective (and easier to do) so you need to talk to clients about what they might expect in the future - could be long letters that require careful thought and response as opposed to full books and records checks.

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By Anonymous
22nd Jul 2008 10:26

Thanks to all for your comments.

To get a blanket coverage seems to be an expensive option for a small practice. I have not included the cover in my fees to date and I would suspect that most of my clients would not approve of an increase to accomodate this cover under the current climate, no matter how small. I really think my best option would be to offer it to all clients under a 'client decide' arrangement at this stage and leave it with them and the insurers to sort out should they desire to progress.

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By Dave Paveley
22nd Jul 2008 10:17

I agree with anon

Ethically, I cannot recommend a director to insure himself for circa £120 per annum and his company for £200 per annum with a 2% chance of an enquiry being opened.

In my 10 years plus in practice I have seen maybe 15 or so enquiries. Since running my own practice I have received 1 in the past 3 years which was dealt with very quickly and easily. That client certainly appreciated the one-off fee of £300 to make HMRC leave her alone rather than a lifetime of £120 per annum.

Having read this thread I will change my engagement letter to mention that insurance is available but will not be offered by me, although I would disagree on it being negligent for me not to have included it to date.

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By Anonymous
22nd Jul 2008 09:43

Small practices
I detest fee protection insurance.

I ran a small practice and after continual pressure from insurers to operate a scheme I took out a policy to cover my entire client base and ended up loosing over £10,000. Mainly because -

1. Despite my best efforts a high percentage of clients dont want to pay yet another insurance policy.

2. It was awful having to hard sell to clients - it upset several that didnt want it.

3. Regardless of the supposed support the insurers provided the admin was horrendous. The amount of time and effort wasted was beyond belief.

What you then have to bear in mind is that all of this is to sell insurance to cover 1 or 2 clients, if you are unlucky.

Then when you try and claim on the policy you have to make sure you follow the procedure exactly or they wont pay, and when they do eventually agree a budget mine didnt pay for over 30 days.

The reality is that most small practices would be better off simply doing Enquiry work for free. But of course as a qualified firm you cant do so!

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By Anonymous
22nd Jul 2008 09:08

Worth looking into
As the comments indicate it is not something you can ignore these days. I do think that you should mention it in your letter of engagement and offer it to everyone, at least that way your clients will be aware of it. Some Chambers of Commerce automatically offer it to their members and likewise some business insurers will also offer it - should cover at least an aspect enquiry.

The problem for us all is cost. The easiest solution (administratively) is to obtain cover for your whole practice and so your clients are automatically insured. Do read the small print and make sure your clients are aware of the small print too. It is very common for insurance not to cover full enquiries and you can void the insurance by failing to notify the insurer in the proper way too. Also you must notify any changes in charge out rate which apply form time to time.

You then need to try and sell this to your clients and also the fact that you are going to charge them higher fees than "Uninsured accountants and Co" down the street, who are knocking out tax returns for a £10 or something silly!

Go and get quotes from the various companies for your client base/intended clients and check out the sums.

I ran a piece on CCH's "new generation" fee protection last week. This sounds like a good product - it is supposed to cover compliance checks/desk audits/interventions as well as all type of enquiry and comes with a help line and support. It will be very pricey but if you can sell that to clients and pass on the cost great.

Although CCH are targetting bigger firms with this sort of cover, I would start out and get a quote for it and work down through the other insurers to see how it all pans out. Another factor to watch out is the cost to your practice of administration. I have set up various schemes when working at different firms and obtaining blanket cover for all clients is much quicker. At one firm we asked clients to opt in - it was a nightmare, probably wasted over a week of my time, even with really good secretarial support.

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By AnonymousUser
21st Jul 2008 22:48

Watch the insurance
Some insurances insist that the matter is dealt with by their own people. Others simply want to watch over your work to make sure that you are not fleecing the insurance company.

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By Anonymous
21st Jul 2008 21:43

Where is a good place to refer clients to?
I am in a similar boat to the original poster.

I don't want to go down the route of offering it myself as I understand it to be relatively expensive for a small sole practitioner to arrange.

Where would you point the clients to, where they can get individual cover? And is the ICAEW happy that we just tell them it exists and then point them to it?

Thanks

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By Anonymous
21st Jul 2008 20:37

Another question
If you dont sell your clients any fee protection cover how do you deal with Enquiries? Would your clients appreciate/pay your fees to deal with an Enquiry?

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By robert newman
21st Jul 2008 16:52

You need to make people aware that insurance exists
It has been suggested that you run the risk of being sued if you do not make your client aware that insurance exists (not that you don't offer it)

Personally, I have enough to do other than to become an insurance broker therefore in all new client welcome letters I mention tax insurance (in two paragraphs) and then say that we don't offer it but many places do and that they should speak with a properly authorised insurance broker.

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