For chartered accountants who wish to limit their clients to a select few, here is how to do the best for those clients.
There are many reasons why chartered accountants may wish to provide their services to a few selected clients. It may be an ‘interest’ in retirement or to maintain contacts with people that one has known for many years during a busy working life.
Alternatively, it could be as a parent at home with young children, using the skills and knowledge previously gained. Or, in these uncertain times, it may be that having a few personal clients in conjunction with an employment may provide the security of an additional income stream.
By having a chartered accountant as their financial advisor, clients can expect a high standard of relevant experience and technical prowess. The professional good standing of the chartered accountant is also backed by a complaints’ handling process and indemnity insurance.
Sole practitioners handling client money will also have a nominated alternate to act when the practitioner is incapacitated or has died. Clients can be assured that their chartered accountant will also act with integrity and objectivity in handling their affairs and is bound by client confidentiality.
While many practitioners would welcome ‘accountant’ to be a reserved term, in the absence of such a restriction, it is the good professional standing of the chartered accountant that provides the client with the assurance of professional competence and due care.
In order to maintain these standards for the client, ICAEW requires all members in practice to hold a practising certificate, to carry professional indemnity insurance, and (in common with all members) to formally declare each year that they have undertaken such continuing professional development as is necessary for the work they undertake.
Whether you are in practice is determined by the nature of the work you undertake.
If more than 10% of your income from the practice is ‘accountancy services’ (as defined in the Council statement on engaging in public practice), then it is likely that you will need a practising certificate and indemnity insurance.
A common misconception is that practising certificates are only required if the accountant is ‘signing off’ reports. This is not the case. ‘Accountancy services’ is quite a wide term and includes, for example, advice on internal control systems and debt counselling as well as tax compliance and bookkeeping.
There are some limited exemptions to the ICAEW requirement to hold a practising certificate for certain work. Unpaid work, say, for a local charity (which has income of less than £250,000) does not require a practising certificate to be held.
ICAEW contributes to the work of its retired members by providing membership of the ICAEW Charity and Voluntary Sector Group without additional charge. The member would need to inform the charity that the voluntary work is not covered by professional indemnity insurance. Similarly, acting as a trustee does not require a practising certificate.
Likewise, a practising certificate is not required when a member undertakes work for friends and family without any anticipation of reward. The member would need to ensure that adequate continuing professional development is maintained, and again it would be advisable to indicate that there is no professional indemnity insurance cover.
Although it may not be a requirement to hold professional indemnity insurance if you are not in practice, nevertheless it is worthwhile to review the risk of the engagements you undertake and consider whether voluntarily taking out insurance may provide you with protection and ‘peace of mind’.
Many members would like to supplement their existing income without incurring the costs of a practising certificate and professional indemnity insurance. As for any member in industry, a practising certificate is not required if there is an employee-employer relationship. However, if there is a client-principal relationship then a practising certificate and professional indemnity insurance will be required.
Please do contact Advisory Services on +44 (0)1908 248250 for further guidance.
There is also guidance on the ICAEW website to assist with setting up in practice.