A sole-practitioner accountant gets a brown envelope from HMRC. It announces a Compliance Check into a corporate client's R&D tax credit claim from two years ago — the kind of enquiry that, if it runs the typical course, will involve four to eight months of correspondence, several technical meetings with HMRC, expert reports, and somewhere between forty and a hundred hours of the accountant's time.
The accountant phones his insurance broker. Two questions: does my PI cover this, and does my fee protection cover this?
The answers are typically: no and yes. They cover different things, and the difference matters.
This article explains what each product actually does, where the two overlap, and what most UK accountancy practices end up holding alongside each other. It is written for practising accountants — including those whose practices already hold both products but who could not quickly explain to a partner meeting which pays for what.
What Professional Indemnity actually covers
Professional Indemnity Insurance — PI or PII — covers your practice when a client or third party makes a civil claim against you alleging that your professional services caused them financial loss. The cover responds to legal defence costs and to any damages or settlement awarded against you, up to the policy limit. The trigger is a claim, real or threatened, against your firm.
In an HMRC enquiry, the client is the one in the firing line, not the accountant. HMRC is not making a claim against the accountant; it is enquiring into the client's tax position. PI does not respond unless and until the client subsequently turns on the accountant and alleges that the accountant's advice or work caused the unfavourable HMRC outcome.
If the enquiry produces a finding that the accountant gave negligent advice — wrong reading of legislation, wrong application to the client's facts, missed planning opportunity, failure to warn — and the client then sues the accountant for the resulting tax-plus-interest-plus-penalties, that subsequent claim is what PI is for. The HMRC enquiry itself is not.
We cover the full PI position for accountants in our pillar guide and the limit-sizing question in our companion article on PI cover sizing.
What tax investigation insurance covers
Tax investigation insurance — usually called "fee protection insurance" or "tax enquiry insurance" — is a different product entirely. It covers the professional fees the accountant incurs in defending the client against an HMRC enquiry. Your hours, your associates' hours, sometimes counsel's fees and specialist tax-investigation-firm fees.
It does not pay the client's tax, interest or penalties. It does not pay damages or settlements. It pays for your time spent in correspondence, meetings, and submissions with HMRC, and it pays it on behalf of the client (so the client doesn't get a bill they weren't expecting) or on behalf of the practice (in different policy structures).
The product comes in several shapes:
Scheme cover sold by the accountancy practice to its clients. This is the most common UK model. The practice signs up to a scheme run by one of the established providers (Croner-i / CronerTaxwise, Markel Tax — which now incorporates the former Abbey Tax — Vantage Fee Protect, PfP and others), pays an annual block premium to the underwriter, and recovers the cost from clients who opt into the scheme. The practice's clients each pay a small annual fee in return for cover that pays the practice's professional fees if HMRC opens an enquiry into their affairs.
Client-level cover bought direct. A client buys cover directly from a provider, usually triggered by their accountant recommending it.
Standalone enquiry-cover bought by a practice for its own affairs — relatively rare, mostly for larger practices that want fee-protection-style cover for their own corporation tax and partnership tax positions.
Different policies cover different scopes of enquiry — routine aspect enquiries, full enquiries, COP9 (suspected serious fraud), Code of Practice 8 (avoidance), VAT enquiries, PAYE compliance reviews, IR35 status enquiries. Read the policy carefully because the more serious enquiries (COP9 in particular) are often excluded from standard cover and require specific endorsement.
The numerical reality of an HMRC enquiry
The reason fee protection exists as a product is that HMRC enquiries are expensive to defend. Industry benchmarks circulated by the major scheme providers put the average cost of defending a full enquiry in the £4,000 to £7,000 range for a typical OMB client, with R&D-credit, EIS, employee-share-scheme and capital-allowances enquiries often running into five figures. COP9 cases involving serious fraud allegations can run into tens of thousands.
For an SME client paying their accountant £1,500 a year for compliance work, an unexpected £6,000 enquiry-defence bill is a substantial unplanned expense. Fee protection turns it into a small predictable annual cost — typically £30-£100 per client per year depending on client type and policy scope.
The practice benefit is less obvious but equally real: scheme-cover income is a margin contributor, and a scheme-protected client base is less likely to push back on the accountant's time billing during an enquiry, which makes the relationship smoother through what is typically a stressful period for the client.
Where the two products overlap (and where they don't)
The simplest test is to ask: who is being claimed against?
If HMRC is enquiring into the client and the client has fee protection — fee protection responds, PI doesn't.
If HMRC concludes the enquiry against the client and the client then claims against the accountant for negligent advice — PI responds (subject to the policy excess), fee protection has done its job and stepped out.
If the enquiry is into the accountant's own tax position — fee protection might respond if the accountant has cover for their own affairs, but most practice scheme covers are for client enquiries, not the practice's own.
If HMRC concludes there is no liability and closes the enquiry — fee protection has paid out for the defence, no PI claim arises, the matter ends.
The two products are complements, not substitutes. A practice that holds PI but not fee protection has a defence-costs gap on every client enquiry; a practice that holds fee protection but not PI is regulated-non-compliant (PI is mandatory under ICAEW, ACCA and AAT rules) and has no protection against the bigger negligence-claim exposure.
A worked example
Take the R&D enquiry from the opening of this article. The accountant has both PI and a fee protection scheme cover for that client.
The enquiry runs from January to August. Total fees billed to the client across that period: £8,400. Fee protection pays the £8,400 to the practice on the client's behalf, less any policy excess.
HMRC concludes that £42,000 of the R&D claim is not allowable. The client owes £42,000 in additional corporation tax plus £4,200 in interest plus a £6,300 penalty for careless rather than deliberate behaviour. Total HMRC liability for the client: £52,500.
The client takes the view that the accountant's R&D submission was negligent and writes a letter before action. Initial PI insurer notification at this point.
The matter is investigated; the accountant's file is reviewed; the conclusion (let's say) is that the accountant did follow the available guidance carefully at the time of the original claim, that the disallowance reflects HMRC's tightening interpretation rather than negligence, and the matter is defended. PI defence costs across six months: £18,000. Outcome: claim discontinued. Practice excess: £5,000 (paid by practice), insurer pays remaining £13,000.
Fee protection has done its job (paid the £8,400 enquiry defence fees). PI has done its job (paid £13,000 of defence on the subsequent threatened claim).
Different products, sequential triggers, both load-bearing.
Where a practice might decide not to hold one or the other
Some practices decide not to operate a fee protection scheme. Common reasons:
The administrative overhead of running a scheme — client communications, opt-in/opt-out tracking, annual renewals, reconciling the underwriter's block premium against client take-up — is more than the margin it generates for a small practice.
The client base is sophisticated enough that clients buy their own cover or self-insure.
The practice's typical engagement value is high enough that clients don't blink at enquiry-defence fees and don't expect protection from them.
These are legitimate choices. There is no regulatory requirement to operate a fee protection scheme; ICAEW, ACCA and AAT mandate PI, not fee protection.
There is no realistic equivalent argument for not holding PI. PI is mandated by the professional bodies, it covers the catastrophic risk to the practice (a large negligence claim), and the alternative — operating without it — is a regulatory breach with severe consequences.
How to decide what to buy at renewal
For the PI side: the accountants pillar and the PI cover sizing article work through the limit, excess, aggregate and run-off decisions.
For the fee protection side: the decision is more about practice operations than insurance economics. Do you have the back-office to run a scheme? Will your client base take it up? Does the margin per client justify the admin? If yes, fee protection adds value; if no, it doesn't.
Most established UK accountancy practices end up holding both. Smaller startup practices often defer fee protection until they have the client volume to make a scheme worth running.
How Apex helps
We are PI brokers — that is our regulated activity. We do not place fee protection schemes ourselves; the major UK fee protection providers sell direct to practices. What we can do is help you think about how your PI cover and any fee protection scheme you operate sit alongside each other, what gaps might exist between them, and how a renewal claims-history conversation should account for both.
If you are looking at PI cover, the accountants sector page is the starting point, and contact us to arrange a renewal conversation.