How to Run a Fee Protection Scheme

To run a fee protection scheme properly, a practice has to decide who is insured, put the right regulatory permission in place if clients are covered, write the arrangement into its engagement letters, and offer membership as a genuine choice. Under ICAEW’s licensing rules a firm must account to clients for any commission and cannot make its accountancy service conditional on buying fee protection.

Step 1: Which scheme model will you use?

ICAEW’s helpsheet on fee protection insurance (published 2012, reviewed 5 November 2025) describes the options. In practice they come down to two questions: who holds the insurance, and who is covered by it.

• Clients covered by an insurance policy. The client benefits from a policy arranged through the practice. This involves arranging insurance for clients, so it needs regulatory permission (see step 2).
• Practice insures its own fees. The firm is the policyholder and the insured. ICAEW says the engagement letter should provide for “the firm, at its discretion, to carry out work if an investigation occurs” and “the client to be liable for the firm’s fees, whether or not an insurance claim succeeds”.

What a practice cannot do is promise clients that it will cover any future investigation for an extra flat fee or an all inclusive fee. ICAEW is clear that this “is effectively writing an insurance contract which can only be undertaken by a FCA authorised insurance company.”

Step 2: Do you need FCA permission?

Arranging insurance for clients, advising on it and helping with claims are regulated activities under the Financial Services and Markets Act 2000. A practice that does this for clients needs one of the following:

• FCA authorisation in its own right;
• appointed representative status, acting under the responsibility of an FCA authorised principal; an introducer appointed representative can only introduce clients and pass on promotions;
• the exempt professional firm route under Part 20 of the Act, using a licence from a designated professional body such as ICAEW.

What are the Part 20 conditions?

Section 327 of the Act sets them out. The firm must be a member of a profession or controlled or managed by members. It “must not receive from a person other than his client any pecuniary reward or other advantage, for which he does not account to his client”. And the service “must be incidental to the provision by him of professional services”. Firms using this route for insurance distribution must appear on the FCA’s register, with the details supplied by their professional body, and must use the client wording required by the FCA’s Professional Firms sourcebook (PROF 4.1.3R).

Step 3: What do ICAEW’s licensing rules require?

ICAEW’s Designated Professional Body (Investment Business) Handbook, effective 1 April 2026, applies to licensed firms. For fee protection, the points practices most often trip over are:

• Commission. Regulation 4.15 says a firm that receives commission “must account for the commission (or other benefit) to the client in writing”, and should give the client details of its remuneration “In good time before the conclusion of a contract of insurance”. ICAEW’s guidance adds that keeping commission needs the client’s express written consent, and that blanket disclosure within terms of engagement is not sufficient.
• No tying. The guidance on cross selling says “a licensed firm cannot insist a client purchases its fee protection insurance when providing accountancy services.”
• Status. A licensed firm acts as an ancillary insurance intermediary and must tell clients so.
• Demands and needs. A statement of the client’s demands and needs is required before the contract.
• Professional indemnity. The firm’s PI cover must meet the minimum levels set for insurance distribution.

Other professional bodies that license firms under Part 20 have their own rulebooks, so check the one that applies to your practice. Our guide to AML supervision for accountants covers which bodies supervise practices.

Step 4: What should the engagement letter say?

Whichever model you use, the letter should leave no doubt about:

• whether the client has joined the scheme and for what period;
• which kinds of HMRC check are covered and which are not, in plain terms;
• that tax, interest and penalties are never paid by the scheme;
• what happens if a claim is declined or the limit is reached;
• for a practice insuring its own fees, that work is at the firm’s discretion and fees remain the client’s liability.

Step 5: How should you price and offer membership?

Clients usually pay an annual fee, and Solar Protect schemes can also be paid monthly by direct debit. Insurance premiums carry Insurance Premium Tax at the standard rate of 12%. HMRC’s VAT guidance on insurance does not deal specifically with accountants’ fee protection schemes, so how your own charge is treated for VAT depends on the structure. Take advice before you set prices.

Offer membership as an active choice. ICAEW’s rules stop you making the accountancy service conditional on it, and for consumer clients the Consumer Contracts Regulations 2013 (regulation 40) require express consent to any extra payment, which a pre ticked box does not give.

Step 6: How do you run the scheme day to day?

• keep an accurate list of members, and add and remove clients promptly as your book changes;
• send renewal reminders before the scheme year ends so cover does not lapse unnoticed;
• record every client’s decision, including those who decline;
• keep policy documents and the summary of cover where clients can find them.

Solar Protect schemes include an online portal to add and remove clients, mailing and premium collection, monthly payment by direct debit and an online claims portal.

Step 7: What happens when HMRC writes?

Notify the claim as soon as HMRC opens a check, before significant work is done, and follow the insurer’s conditions on agreeing costs. Then handle the enquiry in the normal way. Our guides to HMRC letters and what triggers an HMRC investigation help with the client conversation.

Where can I get help setting one up?

Solar Protect designs fee protection schemes for accountancy and bookkeeping practices. See how our accountant schemes work. For the client conversation, read explaining fee protection to clients, and for the bigger picture, fee protection schemes for accountants. If a business client wants cover in its own name, read about our tax investigation insurance or get a quote.

Related guides: fee protection for bookkeepers, the fee protection claims process, fee protection rules by professional body.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 7 October 2026. This guide is general information, not legal, regulatory or tax advice. Check your professional body’s current rules and the FCA Handbook before offering insurance to clients.