Switching accountants may seem a daunting prospect, but with good communication and a little planning, it needn’t be.
If you’ve decided to appoint a new accountant and the handover is not going as smoothly as you’d like, read on for some hints and tips from Approved Accounting on how to nudge things along.
- 1 What are the legal responsibilities of an accountant?
- 2 Is your previous accountant not providing information?
- 2.1 What should I request from my previous accountant?
- 2.2 Check your new accountant has issued a clearance letter
- 2.3 Why some particular documents may not be legally yours
- 2.4 How long should the transition process take?
- 2.5 How easy is it to change accountants?
- 2.6 Assigning authority to your new accountant
- 3 Does my old accountant have to give professional clearance?
What are the legal responsibilities of an accountant?
Registered and qualified accountants have a responsibility to act ethically. This means they should respond promptly, act in your best interests and perform their duties within the bounds of UK law.
Once notified of your intent to leave, and having been supplied with the correct documentation (described below), they should liaise with your new accountant and disclose any matters to them that they should be aware of.
What can hold things up?
If there are any accountancy fees still outstanding with your current accountant, it can hinder proceedings considerably and this fact will likely be disclosed to your new accountant. This could even result in them declining to take you on as a client.
To ensure your switch runs smoothly, it’s therefore wise to ensure you have paid your existing accountant in full for all services rendered. You should notify them that you wish to terminate their services via an accountant termination letter.
Is your previous accountant not providing information?
Here’s what you can do:
Firstly, don’t jump to conclusions that your previous accountant is being obstructive. Take a step back and assess the situation.
Have you clearly stated to your old accountant that you no longer wish to use his or her services from a specified date? This should be done in writing, though it’s always beneficial to remain on good terms so it’s worth a phone call too to clearly state your intentions, outline your reasons and thank the accountant or company for the work undertaken to date if the relationship is still sufficiently healthy.
Secondly, have you notified them of your new accountant’s details? This is a necessary step to permit them to hand over your information and documents to your new accountant.
What should I request from my previous accountant?
A document known as a disengagement letter should come from your existing accountant. This is effectively a handover document that clarifies whether they retain responsibility for any tasks partly underway or are doing a complete handover, and what the new accountant will be taking on.
For everyone’s sake, it’s best to avoid instigating this process in the middle of your next tax return for obvious reasons!
Historical paperwork, such as the client’s financial statements, records created in relation to your accounts and previous tax returns, are generally the legal property of the client and should have been returned to you at the close of every tax year.
Check your new accountant has issued a clearance letter
Your new accountant will need to send your current accountant a professional clearance letter before your accounting records can be transferred. The letter will enquire whether there’s any reason they cannot take you on as a client, request professional clearance and ask that all relevant information is forwarded to them. They will likely request copies of your accounts, tax records, tax returns and any other information they need.
Why some particular documents may not be legally yours
It’s important to note that not all documents created in relation to your business will be deemed yours. Some documents such as working papers may be considered property of the accountant; it all depends on whether the accountant is considered to have acted as ‘an agent’ or ‘the principal’ at the time and what services they supplied to you. If in doubt, it may be prudent to seek legal advice.
How long should the transition process take?
Generally, it should take no more than a few weeks. If the process seems to have stalled, talk to both parties – your new and your existing accountant – to locate where the hold up has occurred. If this still does not resolve matters, you could take the step of making a complaint via the relevant professional body.
How easy is it to change accountants?
It should be straightforward to switch accountants if you have opted for a reputable accountant in the first instance. If you’d like more information about when it might be time to consider a switch, you’ll find further information on our switching accountants page.
Your new accountant will carry out anti-money laundering checks on you and request some personal and business information from you as well as proof of identity – often a passport plus proof of address.
If they are a member of a professional body, they are also obliged to issue an Engagement letter. This is an important document as it outlines the specific agreement they have with you as a new client and sets out basic principles and expectations surrounding the services they will be supplying. Be sure you read it.
Once the switch is made you’ll need to authorise your new accountant to liaise with HMRC on your behalf. This can be done online using HMRC’s authorisation service or by signing a new 64-8 form.
Does my old accountant have to give professional clearance?
Your current accountant should provide any information “honestly and unambiguously” under their code of ethics. It is not in their interests to avoid giving professional clearance to your new accountant so if there is a delay, keep the lines of communication open and remain courteous. And if necessary, make it clear you understand their responsibilities.
The ICAEW states that accountants ‘do not have the authority to give or withhold permission to act’ and ‘the decision whether or not to accept appointment is the responsibility of the prospective accountant’. This means, technically, your existing accountant cannot stand in the way of you moving on, but this is only true if they are a member of a professional body and you have been fair to them and paid them in full.
If not, something called a lien can be used to withhold documents belonging to you until the balance due is settled. Such circumstances are fairly rare, fortunately.
Is your accountant a member of the ICAEW or ACCA?
The best way to ensure a good level of service and communication, best practice and accounting expertise, even upon termination of services is to opt for a member of a professional body such as:
ICAEW – The Institute of Chartered Accountants in England and Wales
ACCA – The Association of Chartered Certified Accountants
Protecting your best interests
Engaging with a fully qualified and accredited accountant offers you a level of protection from individuals that may be offering their services without the relevant training and qualifications. Just as importantly, these bodies lay down standards of professional conduct, so when it comes to clients terminating their services, specific principles apply.
Can you have two accountants?
Yes, you can employ the services of two accountants legally. It can work, though both parties need to be happy to work together and clear on their specific responsibilities. In most cases, it will be more cost-effective to utilise the services of one firm, even if you require the services of different experts within a team.
When should you change accountants?
You shouldn’t be afraid to change accountants if the relationship is not working well for you. Perhaps your needs as a business have changed, you’ve found a specialist in your particular industry or feel you are not getting the level of service you deserve for the fee being charged.
You may even feel you have experienced poor service, received unclear advice or that your accountant simply wasn’t there for you when you were in a fix and needed their expertise.
These are all very valid reasons to look into new accountants, though it’s not a process to rush into. It’s worth considering when would be the least disruptive time for you to switch and to research any new accountants diligently.
Why switch to Approved Accounting?
At Approved Accounting, our directors are members of the ICAEW and as a firm we are a Xero Gold Champion Partner. Our customers are individuals and sole traders, partnerships, limited companies, and contractors/freelancers. We’re a dedicated team of professionals with a wealth of experience in helping small and medium-sized businesses thrive and can assist with everything from your annual tax returns and tax advice to VAT and bookkeeping.
Get in touch today
We help our clients improve the health of their finances through a combination of accounting know-how, technological efficiencies and advice. We can also help make switching accountants as pain-free as possible, so if you’re in search of better or wider service, to understand your accounts better or greater fee transparency, contact us today!