HMRC have published a consultation on the requirement for anyone providing tax advice to hold professional indemnity insurance. The consultation will also consider the definition of tax advice. The consultation will close on 15 June 2021.
The consultation invites views on:
- Proposals to require tax advisers to hold professional indemnity insurance, including minimum levels of cover and how the policy could be enforced and implemented.
- A definition of tax advice.
This was one of the proposals that arose from the Call for evidence: Raising standards in the tax advice market. The consultation highlighted agreement that there were a small number of operators in the market who did not meet the high standards expected of the profession.
The consultation is aimed at any person providing or receiving tax advice or anyone who provides services to third parties to assist in compliance with HMRC requirements, as well as the insurance industry. This would include tax advisers, accountants, legal professionals, financial advisers, payroll professionals, bookkeepers etc.
- In your opinion, do you agree that introducing a requirement for anyone providing tax advice to have professional indemnity insurance satisfies the policy aims of improving trust in the tax advice market, by targeting poor behaviour and allowing taxpayers greater redress when things go wrong?
- If the government introduces the requirement for professional indemnity insurance, what further steps would you recommend?
- Are there any alternative options you would recommend?
- Apart from the costs and impacts outlined above, are there any other costs you foresee for advisers?
Questions for tax advisers
- What are your experiences of obtaining professional indemnity insurance or of the market for professional indemnity insurance?
- If you are a tax adviser who practices without insurance, why is this?
Questions for the insurance industry
- What factors do you take into account when pricing professional indemnity insurance?
- What are your views on the government’s proposals for making information on promoters public? How would having more information about promoters of tax avoidance help you in making decisions about pricing or offering insurance?
- In your opinion, does the insurance market have the appetite and capacity to manage the new requirement?
Questions for people who use tax advisers
- What checks do you carry out when you engage a tax adviser? Do you check whether they are insured?
- Do you have any experience of making claims or complaints against a tax adviser for bad advice that you would be happy to share with us?
Questions for everyone
- Do you think there are any lessons on how complaints are handled in similar industries that we can learn to help improve redress?
- What is the minimum level of cover you recommend, and why?
- What activities should it be mandatory to cover, and why?
- Should the government set mandatory minimum or maximum levels of:
- run-off cover
- What levels should these be?
- Should the government specify what advice must be covered by the policy? What advice do you think should be covered?
- Are there any other insurance requirements the government should require?
- Who should be required to hold the insurance? Should it be the firm, the principal, everyone who is acting as a tax adviser?
- What impact do you think setting minimum mandatory levels of cover would have on:
- the market including the availability of insurance
- We intend to model the definition of who the requirement will apply to on one of the definitions currently extant in legislation. What a) benefits and b) issues are there with using the Dishonest Tax Agent definition or the Money Laundering Regulations definition? Do you have a preference or alternative and why?
- What activities do you think should be excluded from the requirement for compulsory professional indemnity insurance and why?
- Would there be any benefit in having different minimum requirements for different activities?
- What benefits or issues would there be in considering the financial services regulatory distinction between advice and guidance for tax advice?
- What benefits or difficulties do you foresee with the inclusion of a provision around UK taxation in the definition?
- Do you agree with the 3 elements of enforcement?
- What are your views on the enforcement options described above?
- Do you agree that advisers who already hold professional indemnity insurance as it is required by their professional or regulatory body should automatically satisfy the new requirement? How could we check?
- The government’s ambition is for HMRC to share information about the adviser with the client digitally. What are your views of this?
- What impacts do you foresee of introducing the requirement for everyone at the same time?
The consultation will last for 12 weeks from 23 March 2021 to 15 June 2021. To provide views or be involved, please contact HMRC at
Useful guides on this topic
Call for evidence: Raising standards in the tax advice market
HMRC have opened a new call for evidence ‘Raising standards in the tax avoidance market’ which seeks suggestions on how to raise and maintain high standards of competence and behaviour in the tax advisory market.
Raising standards in the tax market: next steps
HMRC have published "Raising standards in the tax advice market, Summary of responses and next steps".