Cover for professional defence costs

Tax Investigation Fee Protection Insurance

Tax investigation fee protection insurance may pay eligible professional fees incurred in responding to specified HMRC enquiries, subject to the policy wording, claim limits and insurer approval. It does not normally pay the tax, interest or penalties due, and cover must usually be in place before the enquiry begins.

Written and reviewed by Waqas Sagar, Member of ICAEW, Fellow of ACCA, Fellow of AAT. Reviewed 21 October 2026 against current HMRC guidance.

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Important: This page explains the type of cover generally; it is not a promise that a particular claim will be accepted. Read the policy schedule, insured events, exclusions, excess, limits and claims procedure. Ask the policy provider or broker to confirm uncertain terms in writing.

What happens, step by step

  1. 1

    Find the policy documents

    As soon as HMRC contacts you

    Locate the certificate, schedule, full wording and any endorsements for the period when the enquiry started.

  2. 2

    Notify the provider

    Before substantial fees are incurred

    Follow the claims procedure and reporting deadline. Sending HMRC’s opening letter promptly helps the provider assess whether the event may be covered.

  3. 3

    Check scope and exclusions

    During claim assessment

    Confirm the tax, enquiry type, insured person, professional adviser, hourly rates, excess, limits and exclusions that apply.

  4. 4

    Obtain authority for work

    Before each material stage

    Some policies require prior approval for meetings, specialist opinions, appeals or work beyond an agreed budget.

  5. 5

    Keep cost and case records

    Throughout the enquiry

    Maintain time records, invoices, correspondence and progress reports so the provider can assess eligible professional costs.

  6. 6

    Review settlement and uncovered costs

    Before closure

    Separate insured professional fees from tax, interest, penalties and excluded work. Challenge a declined claim through the provider’s complaints process where appropriate.

What fee protection may cover

Depending on the contract, cover may include accountancy fees for defending a full or aspect enquiry, VAT or PAYE compliance check, employer compliance work, a dispute or appeal, and sometimes specialist support. Some policies include selected enquiries while excluding routine checks, pre-existing matters or particular taxes and activities.

The policy wording is decisive. Marketing summaries cannot replace the definitions, insured events and endorsements. Check whether the policy covers the business, directors or individuals involved and whether your chosen adviser can act at the insurer-approved rate.

What is usually not insured

Fee protection is designed around professional defence costs, not the underlying liability. Tax, National Insurance, VAT, interest, penalties, fines and the cost of preparing ordinary accounts or returns are commonly outside cover. Work needed to correct records before the insured enquiry may also be excluded.

Policies can exclude issues known before inception, late notification, claims without reasonable prospects, deliberate or fraudulent acts, criminal proceedings, offshore matters or costs incurred without consent. The exact exclusions vary, so they should never be assumed from another provider’s policy.

Choosing and using cover responsibly

Compare the breadth of insured events, annual and per-claim limits, excess, adviser choice, claims control and exclusions—not only the premium. A low-cost policy can provide little value if it excludes the enquiries most relevant to the business or restricts professional rates below the cost of suitable representation.

Insurance should not replace accurate returns, good records and timely advice. When an HMRC letter arrives, notify both the adviser and provider promptly. Do not admit liability, agree a meeting or incur extensive fees solely because insurance may exist; first confirm cover and prepare the tax response on its merits.

How we help

  • Review the HMRC letter and identify the work likely to be required
  • Help assemble the policy documents and factual claim notification
  • Provide a scoped investigation plan and cost estimate for approval
  • Separate ordinary compliance work from potential insured defence costs
  • Maintain clear time, correspondence and progress records
  • Continue the tax response even where coverage is limited or disputed
Guidance reviewed 21 October 2026. This page is general information, not advice on your circumstances. HMRC investigations turn on the specific facts — please speak to us before acting.

Frequently asked questions

Does fee protection insurance pay an HMRC tax bill?

Normally no. These policies generally concern eligible professional fees. Tax, interest and penalties remain the taxpayer’s responsibility unless the particular policy expressly says otherwise.

Can I buy cover after receiving an HMRC letter?

A matter already known is normally treated as pre-existing and is unlikely to be covered by a newly purchased policy. Check the inception date, notification terms and policy wording.

Are all HMRC enquiries covered?

No. Policies define the enquiry types, taxes, people and activities covered and list exclusions. An aspect enquiry, VAT visit, PAYE check, COP9 case or appeal may receive different treatment under different policies.

Can I choose my own accountant?

That depends on the contract. Some providers allow the existing accountant to act subject to approval and rate limits; others use a panel or reserve control over appointments. Obtain approval before incurring material fees.

What happens if the insurer declines the claim?

Ask for the decision and policy basis in writing. Use the provider’s complaint process if you disagree. Depending on who sold or underwrote the cover and your eligibility, further complaint rights may exist.

Is fee protection the same as professional indemnity insurance?

No. Fee protection may cover eligible costs of responding to a tax enquiry. Professional indemnity insurance protects a professional firm against specified claims arising from its work. They serve different risks.

Official and regulatory sources

About the author

Waqas Sagar ACA FCCA FMAAT, Managing Director. 18+ years' experience advising UK directors on HMRC enquiries, supported by a team with over 100 years' combined experience.

Reviewed by Waqas Sagar ACA FCCA FMAAT on 21 October 2026 · Next review: 21 April 2027

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