Engagement letters

New guidance issued on letters of engagement for tax practitioners

The main tax and accounting bodies have issued new guidance on letters of engagement for tax practitioners, following a major redrafting exercise.

Mark Lee, Chairman of the joint bodies’ working party which undertook the rewrite, said:

'The professional bodies are confident that the updated guidance and engagement letter will be a practical and helpful tool for tax practitioners and their clients. The new guidance is designed to be user-friendly and can easily be adapted by smaller practitioners.'

A three-step approach has been adopted:

  • The letter of engagement which identifies the client and whose instructions will be accepted when, for example, acting for a couple, a family, a group or a partnership. It also summarises the basis on which fees will be charged, including any estimate or fee quote and who is responsible for fees.
  • A schedule which sets out the practitioner’s standard terms and conditions.
  • Further schedules which detail the nature and scope of the services to be carried out and the responsibilities of each party. The schedules of service cover the most common recurring compliance work carried out by our members: personal tax for individuals, sole traders and couples; trusts and estates; partnerships; limited liability partnerships; corporation tax; payroll services; benefits in kind returns and payments of Class 1A NIC; VAT and other indirect taxes. A schedule for tax credit work will follow. There are also two schedules for non–recurring services: HMRC enquiries and ad hoc tax advice.

Practitioners should not need to replace their existing engagement letters immediately. However they are encouraged to review them annually and update as appropriate. Where practitioners use the engagement letter and schedules developed by the joint bodies they should adapt them to suit their practice.

The guidance and engagement letters are available as TAXGUIDE 6/08 in PDF (404kb/57 pages) and Word (392kb/57 pages) format.

29 August 2008