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Professional indemnity explained
Dext is bookkeeping automation software that, according to Dext, uses AI to capture receipts and invoices, extract and categorise the data, and publish it to accounting software. It matters because a miscoded transaction or wrong VAT treatment can flow straight into a return, and the practice may be responsible.
Part of: Accountants PI insurance
In short
Dext describes itself as a provider of AI-powered bookkeeping automation that streamlines the capture, coding, publishing and reconciliation of financial data. IRIS Software Group completed its acquisition of Dext on 23 December 2024. Dext says it is certified to ISO/IEC 27001:2022 and hosts data with Amazon Web Services. For accountants and bookkeepers, the PI question is who answers for an AI coding or VAT error: usually whoever the engagement letter makes responsible for the records and the return. PI usually covers the practice's negligence; cyber usually covers data breaches.
In plain terms, Dext lets a business or its bookkeeper photograph or forward receipts, bills and invoices. The software reads the document, pulls out details such as supplier, date, amount and VAT, suggests how to categorise the item, and sends it to the accounting software. The points below are Dext's own description.
For the general risks of this kind of tool, see AI receipt and invoice capture and AI transaction coding.
Dext's security page says it is certified to ISO/IEC 27001:2022, hosts data with Amazon Web Services, encrypts data at rest using AES-256, and encrypts communication using TLS 1.2 or higher. The page does not name the region where customer data is stored, and it does not say whether customer data is used to train AI models. If those points matter to you or your clients, ask Dext directly and keep the answer on file.
Receipts and invoices often carry personal data, such as names, addresses and sometimes partial card numbers. A practice that sets clients up on any capture tool usually needs a processor agreement in place and accurate privacy information.
The short answer: it depends on who the engagement letter says does what. The software suggests; a person accepts or publishes. If the practice runs the bookkeeping and prepares the VAT return, a coding error that it should have caught is usually its responsibility. If the client codes its own documents and the practice only files, the letter should say how far the practice checks the records.
| Arrangement | Who usually bears the professional risk | PI angle |
|---|---|---|
| Client captures and codes in its own account; practice prepares the VAT return | Client for its records; practice for the return to the extent agreed | The engagement letter's checking scope decides much of the dispute |
| Practice runs the bookkeeping using auto-coding rules it set up | Practice | A wrong rule repeated across many items is a service error; PI usually responds subject to the policy terms |
| Practice reviews and submits the VAT return | Practice for errors it should reasonably have spotted | Check how your wording treats penalties and interest claimed as loss |
HMRC's factsheet CC/FS7a says that if a taxpayer asks someone else, such as an adviser, to act for them, they "must do everything you reasonably can to prevent any inaccuracies". HMRC's VAT Notice 700/45 says there is no penalty for an error made "despite taking reasonable care", but careless and deliberate errors can attract penalties, and sets limits for correcting errors on a later return. If a client is penalised after relying on a practice, it may claim the cost from that practice. See AI and VAT returns and AI disclosure in engagement letters.
A bookkeeping practice sets a supplier rule so every invoice from a wholesaler is coded as standard rated purchases. The wholesaler also supplies zero rated goods. Input VAT is over-claimed for several quarters until HMRC queries it. The client pays the tax back and a penalty, then claims against the practice. This is a professional services claim and PI usually responds, subject to the policy terms.
A client uploads its own receipts and accepts suggested categories. The practice prepares year end accounts and the engagement letter says it does not verify the bookkeeping. An error is later found. The practice's position is stronger because the letter was clear, though a claim may still be made and defending it may involve PI.
A client's login is used to view stored invoices containing individuals' names and addresses. That is a data security incident. Cyber cover is usually the first policy to look at, and the practice may need to consider notifying the Information Commission (formerly the ICO).
For more, see PI claims examples for bookkeepers.
Accountants' and bookkeepers' PI usually responds to claims that the practice was negligent in its professional services, such as a wrong VAT treatment it should have caught. Using automation does not usually change that, subject to the policy terms and any AI exclusion or condition. Cyber cover usually responds to data breaches and system compromise, including incident response and notification costs. A capture tool holding client documents sits close to both. See PI cover for AI mistakes in bookkeeping, bookkeepers insurance and cyber insurance for accountants.
See also the bookkeepers AIpedia, Xero JAX and PI for accountants, our accountants PI insurance guide and the AI tools by profession hub.
Apex arranges PI and cyber cover for accountants and bookkeepers; a broker reads every enquiry.
IRIS Software Group. IRIS announced its intention to acquire Dext on 3 December 2024 and completed the acquisition on 23 December 2024. IRIS said Dext would continue to remain focused on its products and services.
Possibly. The software suggests a category, but a person or a rule the practice set up accepts it. If your engagement letter makes you responsible for the bookkeeping or the return, an error you should reasonably have caught is usually yours. PI usually responds to negligence claims, subject to the policy terms.
Dext's security page does not say either way. Dext said in December 2024 that its AI was trained on more than 1 billion receipts and invoices, but that does not tell you how your clients' data is treated. Ask Dext directly and keep the answer with your supplier due diligence.
Dext's security page says data is hosted with Amazon Web Services, encrypted at rest with AES-256 and in transit with TLS 1.2 or higher. It does not name a storage region, so check with Dext before telling clients where their data is held.
HMRC says there is no penalty for an error made despite taking reasonable care, while careless errors can be penalised. Whether relying on software was reasonable care depends on the facts, including how the output was checked. A penalised client may look to its adviser for the cost.
Tell us which tools your firm uses, what they produce and how output is checked. We will review how your PI and cyber cover respond and what insurers will ask at renewal. No fee and no obligation. Or call 0117 325 0027.
Book a PI programme review Get a PI quoteApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.
