Tax Investigation Insurance: Broker, Direct or Accountant?

There are three common ways to buy tax investigation insurance: through an insurance broker, direct from an insurer, or by joining your accountant’s fee protection scheme. Each route puts the policy in a different place, changes how you pay, and shapes what happens when HMRC opens an enquiry. No single route is best for everyone. This guide explains how all three work, with honest pros and cons for each, so you can choose the one that fits how you actually run your business.

Tax investigation insurance, also called tax fee protection insurance, pays the professional fees involved in defending you when HMRC checks your tax position. It does not pay any tax, interest or penalties that turn out to be due. HMRC can open a check into your Self Assessment return, your Company Tax Return, your PAYE records, your VAT and more, and it will not reimburse the cost of your accountant’s time. That gap is exactly what this cover is designed to fill. The question is simply where you buy it.

What does buying through a broker involve?

When you buy through a broker, the broker arranges a policy with an insurer on your behalf and the policy is in your name. You pay a premium, usually once a year, and you deal with the broker for questions and renewals. Solar Protect works this way. The cover meets up to £100,000 of your accountant’s professional fees, carries no excess, and lets you keep your own accountant rather than forcing you onto a panel firm.

What happens at claim time with a broker policy?

If HMRC contacts you or your accountant, you notify the insurer, your accountant handles the correspondence and technical defence, and the insurer pays the agreed professional fees. Solar responds to full and aspect enquiries into Corporation Tax and Income Tax (including Scottish taxes), PAYE and National Insurance compliance checks, IR35 and employment status, the Construction Industry Scheme, VAT compliance checks, and Code of Practice 8. Directors and partners can be included, subject to the policy limits.

Pros: the policy is yours, so it stays with you even if you change accountant; you keep your existing adviser; cover is usually broad; and you have someone to speak to who is not the insurer. Cons: you have to arrange it yourself rather than it being bundled in with your accounts service, and you carry the responsibility for renewing it each year.

What does buying direct from an insurer involve?

Buying direct means going straight to an insurer’s own website or sales team, with no intermediary. The policy is in your name and you pay the insurer directly. At claim time you deal with that insurer for everything, and your accountant still does the technical work of answering HMRC.

Pros: it can feel simple, and you own the policy. Cons: you compare and interpret the wording yourself, you may not have an intermediary to help if a claim is disputed, and not every insurer in this market sells direct to the public, so your choice can be narrower than it first appears. If the product turns out not to fit your circumstances, that is on you to have spotted.

What does an accountant’s scheme involve?

Many accountants run a fee protection scheme for their clients. The accountant holds a block policy with an insurer and offers you a place under it, often as an annual add on to your fees. You are covered under the practice’s arrangement rather than holding your own contract, and the accountant deals with the insurer for you.

Who holds the policy and how do you pay under a scheme?

Under most schemes the accountant is the policyholder and you are a covered client. You pay the accountant, who passes on a share to the insurer. This is convenient and it means the people defending you are already inside the arrangement.

Pros: it is easy to join, the firm handles the admin, and defence and cover sit in one place. Cons: the cover is tied to that firm, so if you move accountant you usually lose it; the scope and limits are set by the practice, not chosen by you; and you may be restricted to that firm doing the work. It is always worth reading the summary of what is and is not included before you sign up.

Which route tends to suit which business?

A broker policy tends to suit businesses that want to keep their own accountant, want a contract in their own name, or expect to review advisers over the years. Buying direct can suit someone comfortable reading policy wordings who wants no intermediary. An accountant’s scheme suits people who value convenience above all and are happy to stay with that firm.

How should I decide?

Work through four questions. First, who do you want defending you, and does the route let you keep them? Second, whose name is on the policy, and what happens to it if you change accountant? Third, what is actually covered, including VAT, PAYE, IR35 and Code of Practice 8, and what are the limits? Fourth, how and when do you pay, and is there an excess? If keeping your own accountant and holding your own contract matter to you, a broker route scores well against all four. To understand what a check involves before you choose, read our guide on what happens in an HMRC compliance check and on who pays your accountant’s fees.

Solar Protect and Apex Insurance Brokers are part of the same group. If you would like to see the cover and price for your situation, you can get a quote or contact us and we will talk it through with you.

Related guides: fee protection schemes for accountants, tax investigation insurance for partnerships.

More on tax investigation insurance. Ready for a price? Ask for a quote or call 01795 841 310.