Professional indemnity insurance rules deserve attention before you agree a practice sale. A client can discover a mistake after the handover, and selling the business does not automatically remove responsibility for earlier advice. The important question is which policy will respond when that claim arrives.
Your arrangements will depend on the transaction, your professional body and whether you stop practising. This guide explains the main decisions for UK accountancy practice owners, including run-off cover, buyer insurance and work continuing after completion. Confirm the proposed arrangements with your broker and solicitor before signing.
Why cover must continue
Professional indemnity insurance, or PII, generally operates on a claims-made basis. Broadly, the policy in force when a claim is made is the relevant starting point, subject to its notification requirements, exclusions and other terms. Having insurance when you completed the work does not, by itself, protect a later claim. Run-off insurance covers eligible claims arising from work undertaken before the practice stopped trading. It matters even where the business has never faced a complaint. A different accountant reviewing a file may uncover an error that neither you nor the client previously noticed.
For example, a tax calculation completed before a sale might be challenged afterwards. That possibility belongs in your exit plan alongside client introductions and the purchase price. Our guide to exit planning for accountancy practices explains how to organise the wider transition.
Professional indemnity insurance rules by body
There is no single run-off rule covering every UK accountant. Identify all professional and regulatory requirements applying to your firm, including any specialist authorisations. Selling a client portfolio and personally leaving a continuing firm may also produce different obligations.
Under ICAEW regulation 2.8, effective from 1 October 2026, when a firm ceases public practice its members in practice must ensure compliant cover for at least two years. They must then take all reasonable steps to maintain compliant cover for another four years. A member leaving public practice while the firm continues falls under the separate regulation 2.7 provisions. ACCA requires arrangements for adequate PII and fidelity guarantee cover for six years from cessation. Its guidance also requires full retroactive PII cover for past business. Other bodies have their own requirements, so check your actual membership and authorisations rather than borrowing another firm’s approach.
Start with the sale structure
In an asset sale, the buyer may acquire selected clients, goodwill and equipment while the seller’s entity remains behind. Establish whether that entity stops practising and what happens to its historic liabilities. A promise that the buyer will handle everything needs to be translated into specific contractual and insurance arrangements. In a share sale, the company normally remains the same legal entity under new ownership. That does not mean the existing policy can simply be ignored. Ask about change-of-control conditions, insurer consent and whether the proposed policy arrangements preserve protection for earlier work and former principals. Give the broker a clear transaction summary: who is selling, who is buying, which entities continue and the proposed completion date. If you sell only part of the practice, explain what remains. The description should match the transaction documents, rather than relying on the loose phrase “selling the business”.
Put this information on a single page for both sets of advisers. Include any previous trading names, partnerships or incorporated entities whose work might still generate questions. Ask each adviser to flag inconsistencies before the proposed structure is finalised. This is especially useful where the practice has grown through earlier acquisitions and the current business name does not tell the whole story. Keep a separate note of any assumptions so the buyer can raise questions before those assumptions become part of the final handover arrangements.
Decide who insures past work
One option is for the seller to maintain separate run-off cover. Another may be for the acquiring practice to insure agreed historic exposures. Neither should be assumed to happen automatically because clients move to the buyer. Where the buyer offers to arrange cover, ask for written insurer confirmation of the entities, people and activities insured. Check the period of past work covered and any retroactive date. An endorsement that only covers work after completion would not solve the seller’s historic exposure. Also consider what happens if the buyer changes insurer, merges again or fails to renew. Agree how the seller will receive evidence of continuing protection and what action follows a lapse. Your broker should assess whether the proposed solution actually meets your obligations.
Make the evidence a completion task with a named owner and deadline. If an insurer needs more information, identify who will supply it and when. An unanswered underwriting question should remain visible on the transaction checklist. Avoid leaving the seller to discover after completion that an expected endorsement was never issued or that the application described a different arrangement.
Review the policy beyond its price
A low premium tells you little without the wording. Compare the limit of indemnity, the basis on which that limit applies, the excess and how defence costs are treated. Ask whether multiple claims could erode the available protection and whether particular services have restricted cover.
Use the following questions when reviewing proposals with your broker. They are practical checks, rather than a substitute for the applicable minimum insurance requirements.
| Policy point | Question to ask |
| Insured parties | Are the seller entity and relevant former principals covered? |
| Past work | Does the wording cover the required historic services and dates? |
| Limit and excess | What can be paid, and what must the insured fund? |
| Defence costs | How are legal costs treated under the policy? |
| Renewal | Who pays, monitors continuity and provides evidence? |
Resolve notifications before completion
Review outstanding complaints and situations that might develop into claims before changing cover. These could include a disputed tax treatment, a missed deadline or correspondence alleging a financial loss. Ask your insurer or broker what must be notified and follow the policy requirements promptly. Do not assume a complaint is too small to matter or that explaining it to the buyer counts as notifying the insurer. Keep the notification, supporting documents and any acknowledgement together. Avoid admitting liability or agreeing compensation without checking the policy’s consent provisions. During preparation for a practice sale, give your advisers a consistent account of known issues. Disclose information through an agreed confidential process, with appropriate controls over client data. Accurate answers help the buyer and insurers assess the actual exposure.
Agree the handover in writing
The sale agreement should distinguish responsibility for work completed before the handover from work performed afterwards. Ask your solicitor how insurance obligations, indemnities and claims cooperation provisions fit together. A contractual allocation between buyer and seller does not itself guarantee an insurer will pay. Take particular care with assignments spanning completion. Record who will finish the accounts, review the figures, submit the return and answer subsequent questions. This makes the operational boundary clearer when a client later asks why something went wrong.
For illustration, an accounts file may be prepared by the seller and submitted by the buyer. Keep a record of what the buyer checked and what remained outstanding. Agree access to engagement letters, working papers and relevant correspondence so a later allegation can be investigated without reconstructing the handover from memory. A short handover schedule can record open jobs, client deadlines, missing information and the person taking responsibility for each next step. Ask both teams to acknowledge it. Keep the schedule updated through the final working day, because a document prepared several weeks earlier may no longer reflect the work actually transferred. Clear records also help avoid duplicated effort and missed follow-ups.
Prepare a clearer exit plan
Bring your handover, adviser discussions and sale objectives into one organised plan.
Cover any work you continue
Retirement from ownership is not always retirement from practice. You may stay for introductions, finish assignments or provide consultancy during an earn-out. Describe those duties accurately to the broker before the run-off start date is agreed. Run-off cover generally concerns past work, so do not assume it covers fresh advice after cessation. Confirm whether ongoing services fall under the buyer’s active policy or require another arrangement, including how you are described as an insured person. Record the agreed scope and dates in the consultancy agreement. If the role changes, revisit the insurance position. An informal request to help an old client can turn an administrative handover into professional work.
Budget and keep the evidence
Ask for the likely premium arrangements early enough to include them in your sale budget. Obtain a current quote rather than assuming a fixed percentage of your previous premium. Where cover renews annually, plan how renewal decisions and payments will be managed after the business closes. Keep the policy schedules, endorsements, notifications and renewal records accessible to the people responsible for claims. Agree a lawful retention and access arrangement for relevant client files, with security and confidentiality maintained after handover. Holding insurance documents is useful only if someone can find them when needed.
Decide who will monitor the renewal calendar if the former owner becomes unavailable. Keep contact details current and make sure important correspondence is not going to an abandoned practice inbox. Where the buyer supplies evidence, agree a practical reminder process rather than relying on someone remembering an annual promise. Review the arrangements whenever the responsible person or insurer changes, and retain the updated confirmation with the sale records.
Conclusion
Professional indemnity insurance rules should be resolved before your practice sale completes. Confirm how past work, continuing services and future renewals will be covered. Ask your broker and solicitor to check that the insurance arrangements match the sale agreement, so you can hand over with clear responsibilities and appropriate protection.
