You do. HMRC does not pay your accountant to deal with a compliance check, and being proved right does not change that. If HMRC opens a check and your accountant spends twenty hours answering it, that time is billed to you at their normal rate, whether or not any additional tax is found. There is no HMRC scheme that reimburses a taxpayer for the cost of professional representation. Tax fee protection insurance exists to meet that bill.

This is the single most misunderstood part of an HMRC enquiry. People assume that the risk is the tax. The tax is a known quantity that gets settled one way or another. The unbudgeted number is the cost of the defence.

Why the cost falls on you

Your annual accountancy fee covers a defined scope: preparing accounts, filing returns, and the routine work around them. Responding to a compliance check is outside that scope. It means retrieving records that may be years old, reconstructing the reasoning behind particular entries, drafting responses to HMRC’s questions, and often several further rounds of correspondence as HMRC follows up.

That is skilled time, and it is billed as skilled time. It is not covered by the fee you already pay, because it is not work anyone anticipated when the fee was agreed.

Being right does not recover the cost

A check that concludes with no adjustment at all still generates a fee note. HMRC does not offer to pay the cost of dealing with a check that turned out to be unnecessary, and there is no general right to recover those costs from HMRC simply because your return was correct.

This is the point at which the arithmetic of fee protection becomes obvious. The premium is a known, small, annual number. The fee exposure is an unknown number that arrives without warning and is largest precisely in the cases that are least your fault, because complexity, not culpability, is what drives professional time.

What drives the size of the bill

Four things, mostly.

How wide HMRC’s questions are. A single-issue query about one entry is cheap. An aspect enquiry that broadens into a full enquiry is not.

How far back it reaches. HMRC’s assessing time limits run to four years in ordinary cases, six where a loss of tax was brought about carelessly, twelve for offshore matters and twenty where behaviour was deliberate. Each additional year is another year of records to retrieve and explain.

How good the records are. Well kept, well indexed records shorten every stage. Poor records lengthen all of them.

How many entities are involved. A check that touches a company, its directors and their personal returns is several enquiries running in parallel.

Where fee protection fits

Tax fee protection insurance pays the professional fees your accountant charges for defending an HMRC enquiry or compliance check. It does not pay the tax, the interest or the penalties. Those remain yours.

Cover is normally arranged in one of two ways. Many accountancy firms operate a scheme, offering cover to their client base so that clients are protected and the firm is not left writing off enquiry time or having difficult conversations about unexpected fees. Businesses and individuals can also hold cover directly.

Common questions

Does HMRC pay my accountant if I am found to be right?

No. There is no HMRC scheme that reimburses professional representation costs during a compliance check, and a check that ends with no adjustment does not create a right to recover the fees.

Can I handle a compliance check myself?

You can. HMRC’s guidance confirms you may also have an accountant or legal adviser with you during a visit. Whether handling it yourself is wise depends on the scope of the check and how confident you are in the records behind the return. The cost of getting the early correspondence wrong is usually larger than the cost of getting help with it.

What does tax fee protection insurance actually pay for?

The professional fees of responding to and defending the enquiry. It does not pay tax, interest or penalties. Exactly which types of check are covered varies between wordings, so read the policy.

Can I buy cover once HMRC has written to me?

No. Insurance responds to events that are uncertain when cover starts. Once a check has been opened the risk has crystallised, and no policy taken out afterwards will pick it up. This is why cover has to be in place before anything happens.

Who typically buys it?

Accountancy firms arranging a scheme for their clients, and businesses or individuals buying cover directly. The commercial logic is the same in both cases: convert an unpredictable fee exposure into a known annual cost.

Related guides

This page explains who bears the professional cost of an HMRC compliance check. It is general information, not tax advice, and it does not describe the terms of any particular insurance policy. Always read the policy wording.

Solar Insurance Services (Medway) Limited is registered in England and Wales, company number 05439438, and is authorised and regulated by the Financial Conduct Authority, firm reference number 459582.

Sources: HMRC guidance on tax compliance checks; HMRC Compliance Handbook CH52100 and CH53000 on assessing time limits.