What does TFPI cover?
On the whole, most Tax Fee Protection Insurance (TFPI) products cover the bulk of accountancy practice professional fees incurred whilst defending clients form HMRC Enquiries & Disputes. These insurances or insured service schemes can be set up in various ways, depending on your FCA regulatory status, either independently or in association with your accounting body (ICAEW / AAT etc.).
There are however many differences between each scheme offered by the mainstream insurers. Some schemes have more extensive cover than others, as well as dedicated helpline in Tax, VAT and other areas such as HR, Employment Law, Civil or Business Law and truly add value to both client and practice, but these also vary quite dramatically in service levels and relevance.
Some providers also offer marketing materials, admin and onward sales support, whilst other providers have excellent policies and claims facilities but offer only basic marketing support.
Note: It is illegal for practices to “self-insure” according to FCA and ICAEW regulations.
What enquiries or disputes are likely to be covered?
Cover provisions can vary from one insurer to the next, but in the main and not exclusively, these policies pay for professional fees incurred in the following HMRC enquiries or disputes:
- Corporation and Income Tax Self-Assessment Full & Aspect Enquiries
- Business Inspection Notices under Schedule 36 (Interventions)
- PAYE/NIC Employer Compliance Disputes
- VAT Compliance Disputes, IR35, CIS Disputes
- Special Civil Investigation & Judicial Review (normally with a reduced indemnity limit)
- Appeal to the First Tier Tribunal or Upper Tribunal
Various insurers may or may not cover actual HMRC site visits (such as VAT or NIC) unless pre-authorised, or some not in any circumstances, and some will allow or exclude discovery work or time that they deem as being statutory compliance in accordance with accepted accounting practices.
The headline indemnity level varies between insurers (between £20,000 and £125,000) and many have lower inner limits dependent on the enquiry or claim type, this can vary between £750 and £15,000. Some TFPI polices also have excesses applied, again, dependent on enquiry type of scheme format. Once again, knowing what to look for and where it is being applied is very important.
Most insurers will exclude or not cover, but not exclusively, the following enquiry types, events or situations:
Enquiries or disputes that commenced prior to the policy cover start date
- Work already done on an enquiry or dispute prior to acceptance of claim by the insurer
- Claims relating in any manner to criminal activity, fraud or tax evasion
- Outstanding taxes, interest, fines or any other duties
- Claims relating to returns that were submitted late / outside of statutory periods
- Work relating to statutory compliance, reconstruction of books and records, routine work
- Deliberate and significant omissions of income from Tax Returns
Providing cover to your clients:
There are various options as to how you offer this valued service to your clients:
- All client;
- client decide / voluntary;
- individual access; or
- a mixture thereof as well as utilising various administrative and on-sell methods and systems.
The trend for accountancy practices to install an All Client scheme as opposed to a Client Decide / Voluntary scheme is increasing. Firms have realised that this ensures far better recovery of fees irrespective of the end clients’ opinion of their risk of HMRC actions (often misconstrued as being minimal), premiums are much more affordable per client and ultimately the practice can (should) build the cost into the normal client service package.
For more information, contact our TFPI specialist Mike Scales:
E: firstname.lastname@example.org | T: 01264 726946 | M: 07776 012995