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HMRC internal manual

Business Income Manual

Specific deductions: insurance: professional negligence

Premiums on an indemnity policy providing cover for professional negligence are allowable as a deduction.

However, any damages, etc. paid as a result of professional negligence are not an allowable deduction to the extent that they are recoverable under an indemnity policy. This result is achieved by allowing a deduction for the payment of damages but then treating the sums recovered under the indemnity policy as trading receipts (see BIM40751).