CH17- Professional indemnity insurance Flashcards
PII
Obligation for all members in practice
Member in practice
Sole practitioner, member of partnership, member of a LLP, proprietor of unincorporated body, director or employee of company with > or equal 5% in equity capital
Self-employed/sub contractor
If do work on self-employed or subcontracted basis, no requirement for PII provided there is written confirmation from the contracting firm that its PII complies with CIOT/ATT PII regulations, and it covers them in capacity of self employed
Contracting firm not a provider of taxation services
They are unlikely to hold PII which meets conditions
Member should take out own policy unless apply for exemption
If apply for exemption, must have written confirmation from contracting firm that no claims would be made
Exemptions to PII
Members who receive an honorarium of less than £1,000 is total per annum in personal capacity
Members who carry out pro bono in their personal capacity
Personal capacity= not in their capacity as members of CIOT/ATT
Charity work
If carrying out work for a charity, ensure charity has PII and that member is covered
Authorisation of PII
PII must be provided by an authorised insurer or must be approved by CCAS
The risks insured must include all civil liability
Required limit of liability
Annual minimum limit of indemnity for each and every claim is £1 million
If the firm’s gross fee income is less than 400,000:
Greater of
-2.5x gross fee income
-£100,000
Excess
Insurance policy may include an excess provided that this excess does not exceed £20,000 per principal PRINCIPLE
Before agreeing to level of excess, firm must satisfy itself that it would be able to meet cost of excess if it were to become payable
Cover not available
If unable to obtain PII, notify CIOT/ATT as soon as practicable
Continuing cover after cessation
Ensure PII covers a period of 6 years after cessation from engagement
Minimum level of cover will be based on their gross fee income of year immediately preceding date of cessation
Costs
Cover should either be ‘cost inclusive’ or ‘costs in addition’
‘Costs in addition’ afford a higher level of protection so is recommended
Evidence of PII
CIOT/ATT may request a copy of member’s PII certificate and policy details
Employees
Do not generally need their own cover, subject to certain exceptions
Liability capping
Be careful in following situations:
- No engagement letter
- Liability caps would not extend to claims by 3rd parties
- Rejected by courts
