Fee Protection Insurance
Since 14 January 2005, practices wishing to offer tax investigations insurance to their clients have faced increased regulatory requirements from the Financial Services Authority.
The regulations are designed to protect consumers but the new regulatory requirements governing insurance intermediaries initially appeared to reduce many practices’ ability to provide Professional Expenses Insurance (PEI) to their clients. Many practices are unable or have no desire to gain the appropriate authorisation merely for one service they offer their clients – meaning many practices felt they had no choice but to cease offering PEI. But this is not the case. Those practices that do not wish to become Designated Professional Body (DPB) licensed, or fail to meet the relevant Professional Indemnity Insurance (PII) requirements, can still be protected with the benefits of PEI, but rather than acting as an insurance intermediary, practices can become the policyholder of their scheme and simply offer their clients a tax investigation service.
How it works
This service covers the cost of tax investigations and disputes and allows the client the opportunity to acquire an interest in the firm’s policy but does not give them any direct rights against the insurer. Therefore, if the client is selected for investigation by HMRC, it will engage the practice to handle the enquiries on the client’s behalf and the firm will debit the fees from the client’s account. However, the practice will also make a
claim on its insurance policy and credit the client’s account with the recoveries. This means that the client will normally have nothing to pay and – if VAT registered – will recover the VAT element of the fees on their quarterly VAT return. The practice continues to have the discretion to charge the client for work which cannot be reimbursed under its policy, but, as the policy has an extensive range of cover, this is not likely to happen. The costs and the policy content of a Practice Protector policy are comparable with those that opt to be a regulated intermediary.
Practice Protector was developed by Abbey Tax Protection in conjunction with specialist insurance counsel, meets all the regulatory requirements of the Financial Services Authority and has the approval of ACCA –
so practices can be assured of a policy that meets all regulatory requirements but allows them to offer PEI without becoming an insurance intermediary. Tax investigations are increasing on an annual basis and no one is immune from enquiry. PEI not only protects your fees in the event of client enquiry but can also provide an annual revenue stream for your practice.
Practice Protector is an increasingly popular alternative for practices who do not wish to become a regulated intermediary – almost 80% of our client base has opted for this straightforward alternative.
Protecting your practice
Our new Practice Protector policy is the simple way to provide PEI. As the policyholder, you have the protection of a fully regulated scheme but the service you provide to your clients covers the costs of investigation by HMRC without time consuming administration. If you cannot comply with the regulatory requirements of a traditional scheme, Practice Protector is the ACCA’s recommended alternative.
In the past, many accountancy firms have been unable to offer Fee Protection to their clients due to minimum order values or because only a few of their clients wish to subscribe. Abbey Tax has resolved this issue with the launch of their new Tax Start scheme which has no minimum order value. All you need to do is invite your clients to subscribe, register those who join (even if it is only one client) and pay Abbey Tax.
Tax Start offers comprehensive protection for your clients and includes cover for aspect enquiries and HMRC's new Schedule 36 'interventions'. You will also receive access, based on the number of clients subscribing to your scheme, to Abbey's extensive Tax & VAT Helpline facility.
More information about Tax Start can be found in the Related Documents section on the left hand side of this webpage. In order to benefit from Tax Start just complete the simple Practice Profile Document and you will be sent everything you need to set up your scheme and register your clients. You will note that that there are certain conditions that your practice must meet in order to benefit from Tax Start, one being your charge out rates must not exceed £85 per hour. If you do not meet the criteria for Tax Start, Abbey Tax will be delighted to offer you an alternative fee protection package which will still offer all of the benefits at excellent rates.