Legal services (such as advice on the legal aspects of tax and company law, and work on probate and succession) already comprise a significant element of accountancy work in the UK.
Changes in the way legal services are regulated could also affect accountancy services by:
- allowing new ways of practice, such as multi-disciplinary practices between lawyers and accountants;
- giving an opportunity to change some of the restrictive practices which have inhibited competition between lawyers and accountants; or
- restricting the ways in which advice on tax or company law, or general business advice, can be given
ICAEW aim to submit a formal application to the Legal Services Board to license firms to provide a full probate service (including the element currently reserved to lawyers) in May 2011, following a short public consultation. Following this, we will be reviewing our regulatory policy in the area of legal services. This is an area of significant importance for the future of the accountancy profession and ICAEW policy will be influenced by member demand. We will be canvassing member opinion more actively at a later stage, but in the meantime we would welcome your input. Please let us know:
- About any immediate or medium term concerns you have over competition with law firms, following the recent reforms
- Whether you would like to work more closely with lawyers yourself, by setting up an Multi-Disciplinary Practice or ABS
- If so, whether you would envisage this as being regulated a) wholly by the Solicitors Regulation Authority, b) wholly by ICAEW or c) by a mixture of both
- How strongly would you prefer ICAEW to be in a position to regulate Multi-Disciplinary Practice or ABS providing a wider range of reserved legal services (and not just probate services) whether such are linked to accountancy practice (such as tax litigation) or freestanding such as conveyancing
- Which of the six reserved legal services you would like your ABS to provide. A typical high street solicitors practice provides all the reserved services except rights of audience (before the higher courts) and notarial services. A merger between high street practices, regulated by ICAEW, would therefore require us to be able to licence firms for the conduct of litigation, reserved instrument activities (including conveyancing) and the administration of oaths as well as probate activities.
Please send feedback to abs@icaew.com
ICAEW has prepared a short questions and answers paper (PDF 229KB/3 pages) on the implications for chartered accountants upon the advent of “Alternative Business Structures” for the provision of legal services including multi-disciplinary practices.
- Legal Services Reform - why should I worry?
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We have read of solicitors stealing client monies, claims mismanagement and a growing unhappiness over the mechanisms to handle complaints about solicitors. A groundswell of general criticism lead to the Clementi Report in 2004, and the Legal Services Act 2007 which threatens to revolutionise the delivery of legal services. So it’s about law and lawyers isn't it? Why should accountants and other professionals be worried?
Think of it as Professional Services Reform instead and the implications become more obvious.
External investment will be permitted and new types of business models can be established. The aim is to allow the efficient delivery of legal services, benefitting the consumer and enhancing access to justice. Increased efficiency may mean more efficient competition with accountancy.
- Are there new opportunities?
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One of the ways the government has chosen to achieve its aims is to positively encourage multi disciplinary partnerships (MDPs) to develop, providing legal services in conjunction with other professional services such as accountancy.
We have had MDPs in all but name for many years with skilled people without accountancy qualifications working in the accountancy profession at the highest level. Now lawyers can enter the MDP arena. By utilising the new business structures permitted in the Act solicitors can access new sources of external capital and expertise. External ownership is permitted for the very first time.
Will this give lawyers a competitive advantage? What if your most promising tax accountant is lured away by the offer of partnership in a revamped and expanded law firm (that could be funded and managed by venture capitalists) or a local solicitors practice gears up and takes on some accountants to compete directly with you?
Will you want to utilise the changes yourself and perhaps provide some legal services as well? Perhaps some specialist litigation linked to your core business so you don’t have to send it to solicitors and you can provide a one stop service (what about providing tax litigation alongside as tax advice?). Might you invest in or own a business providing different professional services which you run using your specialist financial skills?
- What are the innovations?
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The Act does not do away with current structures available to lawyers, such as partnerships, LLP’s or acting as a sole practitioner.
The Act introduces a new and additional beast called an Alternative Business Structure or ABS which must be licensed by an approved regulator. It is this new entity that could provide opportunities for accountants, or increase the competitive strength of other professionals such as solicitors.
- What could an ABS look like?
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What is common to all ABS and the current structures is the delivery of a reserved legal service as part of the professional practice. These are the services specifically reserved to solicitors (and a few other legal professionals such as barristers and notaries) and include the conduct of litigation, advocacy, probate, and conveyancing. The volume of reserved services actually supplied by the practice could be very large or very small, which is why this is so relevant to you.
So an ABS could be a law firm (with some lawyers delivering a reserved legal service) with a few “add ons” including accountants, surveyors or other professionals. Equally it could be accountancy or surveying dominated firm with a few “add on” solicitors.
What is new to the law firm ABS model however are new rights of access to external capital and ownership which could revolutionise how professional services firms are funded and operate. This could get the attention of your legal competitors, or anyone keen to fund and manage your legal competitors in a more efficient way.
- Final words
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The world of professional services delivery will be changing and it is impossible to predict what form those changes will take when the first ABS are licensed in autumn 2011.
The ICAEW is engaging with the policy makers, regulators, and other professions involved ensuring that accountants are not disadvantaged and are given full opportunity to participate if they wish.
The most significant effects are likely to be on accountants working in practising firms in the UK.
Accountants working in business, commerce, the public or third sector, may be affected as the reforms will influence the way in which organisations can access legal services - the more effective the reforms, the more cost effective the service. Important factors such as the availability of legal professional privilege may also be altered.
International accountants may be interested in following this debate, to inform their ideas on ways in which the provision of professional services could be liberalised, to enable the best service to be given by accountants to their clients. There are many restrictions surrounding the services given by the legal profession in many countries, though these tend to vary widely.
Introduction
In 2007 the UK Government introduced the Legal Services Act 2007 with the stated aim of liberalising the market for legal services.
ICAEW has:
- Responded to a number of consultations on legal services reform, copies of which are available below
- Participated in a number of steering groups, seminars and conferences, and held meetings with the Legal Services Board, Solicitors Regulation Authority and other interested parties.
In the meantime, the current restrictions on the provision of reserved legal services by accountants still apply, as set out in Regulations, standards and guidance "Accountants and Legal Services"
The clients of accountants do not benefit from legal advice privilege, though there may be some protection for their confidential information through litigation privilege, where accountants act together with a solicitor or barrister. Money Laundering suspicious activity reports (SARs) should not be made, where money laundering suspicions are formed from information that came in the course of providing legal advice or litigation services.
Guidance on the "The Privilege Reporting Exemption" is available from the Regulations, standards and guidance Section "Anti-money laundering guidance for the accountancy sector"
Representations
ICAEW REP 44/12
Request for Advice; proposed Changes to the operation of the Bar Standard’s Board Code of Practice-the Cab Rank Rule
ICAEW REP 06/12 (PDF 45KB/3 pages)
The Separate Business Rule - a letter to the SRA
ICAEW REP 109/11 (PDF 225KB/6 pages)
Will-Writing, Estate Administration and Probate Activities
ICAEW REP 108/11 (PDF 340KB/7 pages)
Enhancing consumer protection, reducing regulatory restrictions
ICAEW REP 50/11 (PDF 44KB/2 pages)
Ownership and control of firms providing legal services under the Legal Services (Scotland) Act 2010
ICAEW REP 106/10 (PDF 23KB/2 pages)
Law Commission, 11th Programme of Law Reform: Legal Professional Privilege
ICAEW Rep 85/10 (PDF 45KB/3 pages)
Review of the Solicitors Accounts Rules
ICAEW Rep 75/10 (PDF 60KB/7 pages)
Outcomes Focused Regulation - transforming the SRA's regulation of legal services
ICAEW Rep 20/10 (PDF 51KB/3 pages)
Alternative Business Structures Licensing - Ownership and control of firms providing legal services under the Legal Services (Scotland) Act 2010 ICAEW has prepared a short
questions and answers paper on the implications for chartered accountants upon the advent of “Alternative Business Structures” for the provision of legal services including multi-disciplinary practices.
ICAEW Rep 15/10 (PDF 50KB/2 pages)
Representations made following publication of the final report of the Jackson Review of Civil Litigation Costs to draw attention to the anomaly of Chartered Accountants briefing barristers,
under Licensed Access to the Bar, being unable to recover their costs, unless a solicitor is also involved in the litigation, whether or not they add value to the process.
ICAEW Rep 114/09 (PDF 65 KB/6 pages)
Consultation Paper issued by the Legal Services Board on proposed rules to be made under sections 30 and 51 of the Legal Services Act 2007
ICAEW Rep 85/09 (PDF 117KB/16 pages)
Discussion Paper issued by the Legal Services Board entitled "Wider Access Better Value Strong Protection" on developing a regulatory regime for alternative business structure.
Relevant representations and background work by ICAEW