Fee Protection Schemes for Accountants

A fee protection scheme is how an accountancy practice makes sure that the cost of defending a client in an HMRC enquiry is paid for. The practice arranges insurance through a scheme provider, clients join for an annual fee, and when HMRC opens a check the insurer pays the accountant’s professional fees up to the policy limit. It never pays the tax, interest or penalties themselves.

What problem does a fee protection scheme solve?

HMRC does not reimburse the cost of answering its questions. When it opens a compliance check, someone has to read the letter, gather records, reply to information requests and negotiate the outcome. That work can run for months, and it is rarely in the fixed fee for preparing accounts and returns.

Without a scheme, a practice has two poor choices: bill the client for unbudgeted enquiry work, often after a stressful letter, or absorb the time. A scheme replaces both with a known annual cost. HMRC carried out 306,000 compliance checks in 2025 to 2026 (see our HMRC enquiry and investigation statistics), so most practices with a sizeable client base will see some every year.

How does a fee protection scheme work?

The usual shape is simple:

the practice sets up the scheme with a provider such as Solar Protect, which arranges the underlying insurance;
the practice offers membership to its clients, usually as an optional annual charge alongside the accounts fee;
clients who join are covered for the scheme year, and clients can be added or removed as the practice’s book changes;
when HMRC opens a check into a member, the practice notifies the claim, does the defence work and the insurer pays the agreed fees up to the limit.

The client keeps working with the accountant who already knows their affairs. That continuity is one of the main reasons practices prefer a scheme to clients buying separate policies elsewhere.

Who is the insured: the practice or the client?

This is the most important design question, because it decides how the scheme is regulated. ICAEW’s helpsheet on fee protection insurance (reviewed 5 November 2025) sets out several approaches, and they fall into two groups:

The client is covered by the insurance. The practice is then involved in arranging insurance for clients, which is insurance distribution, a regulated activity. The practice needs FCA authorisation, a principal firm to act as its appointed representative, or a licence from its professional body under the exempt professional firm regime.
The practice insures itself. ICAEW describes this as a firm insuring its own fees: “The clients are not the policyholders, the firm is.” The engagement letter has to keep the work at the firm’s discretion and keep the client liable for fees whether or not a claim succeeds.

ICAEW also warns that a practice cannot simply promise to cover any future investigation for an extra flat fee, because that “is effectively writing an insurance contract which can only be undertaken by a FCA authorised insurance company.” We explain the practical steps in how to run a fee protection scheme in your practice.

What does fee protection usually cover?

Cover varies by insurer and scheme, so the policy wording always decides. Solar Protect cover pays up to £100,000 of professional fees with no excess and responds to:

full and aspect enquiries into Corporation Tax and Income Tax returns, including Scottish taxes;
PAYE and National Insurance compliance checks;
IR35 and employment status disputes;
Construction Industry Scheme checks;
VAT compliance checks;
Code of Practice 8 investigations.

Directors and partners of covered businesses can be included, subject to the policy limits.

What does it not cover?

Fee protection pays for representation, not outcomes. Tax, interest and penalties found to be due are never covered. Enquiries that have already started before cover begins, and cases involving dishonesty or fraud, are normally excluded. Our guide to what tax investigation insurance does not cover goes through the usual exclusions.

Why do practices run schemes?

Clients get representation they might otherwise skimp on. A client facing a large unplanned bill may push to concede early. With fees covered, the accountant can defend the position properly.
The practice gets paid for enquiry work. Time that would have been written off or argued over is funded.
Conversations get easier. Explaining an HMRC letter is calmer when cost is not the first question. Our guide to explaining fee protection to clients covers the wording.
Clients stay. A scheme links the client’s protection to the practice that handles their affairs.

How is a scheme different from the client buying their own policy?

A client can buy tax investigation insurance through a broker or direct from an insurer, in their own name. That policy stays with them if they change accountant. Under a scheme, cover is linked to the practice. Our comparison of buying through a broker, direct or through your accountant sets out the trade offs from the client’s side.

Is the scheme fee tax deductible for clients?

Often not. HMRC’s Business Income Manual at BIM46452 says premiums for policies covering accountancy fees incurred in negotiating additional liabilities arising from careless or deliberate inaccuracies are not allowable, and that “The cost remains disallowable even if the taxpayer makes no claim under the policy”. Clients should not assume they can claim the cost against profits.

How does fee protection sit alongside professional indemnity?

They protect different people. Fee protection pays the client’s defence costs when HMRC opens a check. Professional indemnity insurance protects the practice when a client alleges its advice or work caused a loss. Read fee protection and professional indemnity: how they fit together.

How do I set up a scheme with Solar Protect?

Solar Protect builds schemes for accountancy and bookkeeping practices, with an online portal to add and remove clients, marketing and mailing support, premium collection, monthly payment by direct debit and an online claims portal. See how our accountant fee protection schemes work. For an individual policy for a business client, read about our tax investigation insurance or get a quote.

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 7 October 2026. This guide is general information, not legal, regulatory or tax advice. Practices should check their own professional body’s rules before offering insurance to clients.