Tax Advisers Professional Indemnity Insurance
Specialist tax advisers are paid for judgement rather than compliance. Restructuring a family company before a sale, the capital gains position on a property portfolio, residence and domicile questions, employee share schemes, inheritance tax planning. The fee on a piece of planning advice is often modest against the tax at stake, and a claim is usually measured by that tax rather than the fee.
The Chartered Institute of Taxation and the Association of Taxation Technicians require members in practice to hold professional indemnity, and members of both bodies, along with several accountancy bodies, follow Professional Conduct in Relation to Taxation. PCRT sets out standards on tax planning, and an insurer looking at a planning practice will want to know that the firm's work sits comfortably within them.
Avoidance is where this class has changed most. HMRC's penalty regime for enablers of defeated tax avoidance means an adviser who designs, markets or facilitates an arrangement that is later defeated can face a penalty directly, alongside any claim from the client. Insurers draw a firm line between ordinary planning and anything resembling a scheme, and a practice's history matters as much as its current work.
We can advise tax advisory practices and independent tax consultants on professional indemnity that meets their professional body's rules and reflects the planning work they do, including run off for consultants who are winding down.
Common claims and risk exposures
The exposures that produce claims in this trade, rather than a generic list.
Planning that does not achieve the result
A reorganisation that failed to qualify for the relief it was built around, a business asset disposal relief claim that fell over on the trading test, or an inheritance tax plan that did not survive the seven year rule. The loss is the tax the client expected not to pay, plus interest.
Capital gains and property advice
Private residence relief, incorporation of a let property business, the timing of disposals and the interaction with stamp duty land tax. These are high value questions where the facts change between advice and transaction, and the adviser is blamed for the gap.
Historic scheme involvement
Disguised remuneration, film partnerships and other marketed arrangements continue to generate claims years after the event. A firm that referred clients to a promoter, or merely implemented a scheme someone else designed, can still face allegations about the advice it gave on risk.
Enquiries, disputes and settlements
Handling an HMRC enquiry or negotiating a settlement on a client's behalf. A claim may follow where a client feels they were advised to concede too much, or where a disclosure opportunity was missed and penalties increased as a result.
Advice outside the adviser's experience
A consultant asked about something adjacent to their specialism, such as an overseas element on a domestic engagement or a VAT question on a direct tax matter, who answers rather than referring on. The engagement letter often decides whether this was within scope.
The cover we arrange
We arrange professional indemnity and related insurance around the services you provide, the clients you work with and the contractual requirements you face. The appropriate cover and limits will depend on your individual activities and the terms available from insurers.
Professional indemnity
Claims alleging negligent tax advice, planning or representation. Written on a claims made basis, which suits work where HMRC may challenge a position several years after it was taken.
- Negligent planning and advice
- Representation in enquiries
- Meets CIOT and ATT requirements
- Defence costs within the policy
Investigation and penalty proceedings costs
The cost of defending the firm itself where HMRC investigates an adviser's role in an arrangement, or where a professional body opens a disciplinary matter. Penalties themselves are a separate question from the cost of responding to them.
- Professional body disciplinary costs
- Response to HMRC enquiries into the adviser
- Legal representation
- Subject to policy terms and limits
Run off
Many tax consultants practise alone and retire without a successor. Planning advice given in the final years of practice can be challenged long after, so the professional bodies typically expect cover to continue after a member stops practising.
- Required by professional bodies
- Long tail on planning advice
- Sole practitioners and retirements
- Arranged before ceasing practice
Cyber and data
Tax advisers hold detailed financial, family and identity information. A compromised mailbox used to send fake payment instructions to clients, or to file fraudulent returns, is a realistic threat for a small practice.
- Data breach notification
- Email compromise
- Ransomware and recovery
- Third party data claims
Office and liability
Premises, equipment and records, together with public liability for client visits. Employers' liability can be arranged where required, subject to the policy terms, and becomes a legal requirement once the practice employs anyone.
- Office contents and equipment
- Public liability
- Employers' liability where required
- Records reconstitution
What an underwriter will ask
Having these to hand shortens the process considerably, and usually improves the terms.
- Fee income split between planning, compliance, enquiry work and specialist areas such as share schemes or international tax
- Any involvement in marketed or disclosed avoidance arrangements, as promoter, introducer or implementer
- Whether the firm has received any enquiry or notice in relation to enabler penalties or disclosure obligations
- Professional body membership, CTA or ATT qualification, and who signs off planning advice
- Typical and largest tax at stake on a single engagement
- How engagement letters define scope and exclude advice outside it
- Whether the practice also prepares accounts or acts in a wider accountancy capacity
- Claims and circumstances notified over the last six years
What affects the cost of your insurance?
The main factors insurers consider when assessing the premium.
Planning content
A practice whose income is mainly enquiry work and straightforward compliance is rated differently from one where bespoke planning on large transactions is the core service.
Scheme history
Past involvement in marketed arrangements is one of the factors insurers weigh most carefully. It can affect whether an insurer will quote as well as the price and the exclusions attached.
Size of the tax at stake
The limit a firm needs is driven by the largest liability one piece of advice could produce. A consultant advising on business sales needs a different limit from one handling personal tax returns.
Conditions and exclusions to consider
Terms vary between insurers, so treat these as the questions to ask rather than a description of any one policy.
Avoidance schemes
Commonly excluded or written with specific conditions, and the definition used by the insurer matters. A firm that has implemented arrangements in the past should expect detailed questions and should answer them fully at proposal.
Penalties imposed on the adviser
A penalty charged to the firm itself, such as an enabler penalty, is generally uninsurable. A penalty the client incurs because of the firm's negligent advice is different, and may form part of the client's claim.
Guarantees of outcome
Where an adviser has promised a particular tax result, or agreed to refund fees if the result is not achieved, insurers may not cover the contractual promise beyond what negligence would have produced.
Work outside declared activities
Advice in an area not declared on the proposal, such as international structures from a practice that described itself as domestic only, may fall outside cover. Changes in the work should be notified during the policy year.
Common questions
Do CIOT and ATT members have to hold professional indemnity?
Members in practice are required to hold professional indemnity under their body's rules, with the details set by the body and updated from time to time. Check the current requirements directly with your institute, and remember that the minimum is a floor rather than a measure of the risk on your largest engagement.
Is an enabler penalty covered by professional indemnity?
Penalties charged to the adviser personally are generally uninsurable. Some policies may contribute towards the cost of responding to HMRC or defending the adviser's position, subject to the terms, but the penalty itself usually sits with the firm.
We stopped scheme work years ago. Do we still need to disclose it?
Yes. Claims on historic arrangements are still being made, and an insurer that discovers undisclosed involvement after a claim may have grounds to decline. Full disclosure at proposal usually produces clearer terms than discovery later.
How is a tax adviser's cover different from an accountant's?
The emphasis differs. An accountant's exposure is often in volume compliance work and deadlines, while a specialist tax adviser's exposure sits in fewer, larger pieces of planning advice. The insurer's questions follow the same split, and the limit needed often differs too.
I am retiring. What happens to claims about my past advice?
They can still be made, and on a claims made basis there must be a policy in force when they arrive. Run off cover answers that, and your professional body may set expectations for how long it should continue.
How do I get a quote from True Risk Solutions?
Call 01304 262880 and speak to a broker, or email info@truerisksolutions.co.uk with what you do, what you need cover for and a phone number with the best time to call, and a broker will call you back. We need a phone number to quote, because the cover and the price depend on questions that are quicker to answer on a call than by email.
Speak to a specialist who understands your industry
Tell us about your business and the work you undertake, and we will come back to you with cover options built around it. Call 01304 262880, or email us with a phone number and the best time to call and a broker will ring you back.