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Do independent advisers and consultants need a practising certificate?

This is a common question to the ICAEW’s Regulatory Information helpline. As each situation is different there is no one size fits all answer. This article contains some pointers and examples to help you determine whether or not you need a practising certificate (PC) for the work you do.

Key points to consider as an independent adviser or consultant

The full guidance is available in the ICAEW statement on engaging in public practice. This explains what is meant by ‘public practice’, the type of services it includes and who needs a PC and when.

As an independent adviser or consultant there are two key points to consider:

  1. Does your role fall within ICAEW’s definition of accountancy and reserved services?
  2. What is your relationship with the organisation you are providing services to?

Definition of accountancy and reserved services

The definition of accountancy and reserved services in the statement is wide ranging and in addition to what you might expect to see (eg traditional accounting roles such as preparation of accounts, tax and audit) it also includes things like:

  • Bookkeeping and payroll
  • Internal audit of accounting and internal control systems
  • Advice or consultancy on accounting and financial reporting systems
  • Preparation of business plans or budgets
  • Business funding advice (except where the purpose of the advice is to actively seek or negotiate the source of funds)
  • Due diligence
  • Management consulting on accountancy activities
  • Valuations
  • Compliance services (including file reviews) supplied to accountancy practices

In essence any role that draws on your skills and training as a chartered accountant are likely to fall within the definition. It’s also worth looking at the list of what is not considered an accountancy service as this can be a quick way to be sure you don’t need a PC. The lists of what are, and what are not, considered to be an accountancy service are included in Annex 1 to the ICAEW statement on engaging in public practice.

If you are happy that your role is outside the definition of accountancy and reserved services, you do not need a Practising Certificate. That also means you do not need to go on to consider your relationship with the organisation.

Relationship with the organisation you provide services to

If, however, your role falls within the definition of accountancy services you must also consider your relationship with the organisation(s) you provide services to.

There are two exemptions from the PC requirements that may be helpful to note.

  1. As an employee (even if only on a temporary contract or via an agency) you do not need a PC unless the organisation is an accountancy firm and you will be a principal or held out as one.
  2. You do not need a PC if you are not in a client/principal relationship with the organisation you are providing services to and they accept responsibility for your work. This includes self-employed assignments where you are working on the instructions of the organisation and they accept responsibility for your work. This sort of arrangement would normally be covered by a contract or other agreement and ICAEW recommend that you always have a written agreement in place to clarify your position.

Voluntary and charitable work

There are some specific exemptions that relate to helping out small local charities or community organisations, friends or family. These exemptions enable good causes to benefit from the input of a chartered accountant without the individual concerned being required to meet additional requirements.

Holding out

Regardless of the work undertaken and the relationship with the organisation, be careful to avoid being ‘held out’ as a member in practice and have safeguards in place – especially if the organisation you are providing services to is itself providing accountancy services.

You should also take care in your marketing materials and on social media to avoid giving the impression that you are a practising member.

Practical examples

Independent and advisers and consultants are involved in a wide variety of activities and the guidance can be difficult to interpret and apply to your specific situation. When considering your own circumstances, the following practical examples may help.

Full time interim FD

Your role will involve activities that fall within the definition of accountancy services. However, this is an internal role and the relationship is not one of client and principal - it is therefore unlikely that you would be considered to be in practice.

Issues would be likely to arise only if the organisation for whom you’re working itself provides accountancy services. In that case, if you are a statutory director, you are a principal in the practice and need a PC. If the title is purely functional then you need to be wary of ‘holding out’.

Part time contract to oversee the installation of a new finance system

The work falls within the definition of accountancy services. Therefore you need to consider the relationship. If you are a part time employee then no PC is needed. If you are self-employed, is your relationship one of principal and client? If you are working under the supervision of the organisation concerned and they accept responsibility for your work then you would not need a PC as you would not be considered to be in a principal and client relationship.

One other question that may be relevant in this scenario is what else you do – perhaps for other organisations. Remember that you need to consider each role separately.

Training provider to a number of organisations

Providing training (whether accountancy related or not) is specifically outside the definition of public practice. Therefore you do no need a PC as a training provider regardless of your relationship with the organisations for whom you provide this service.

Providing services through a personal service company

Whether you provide your advisory or consultancy services via a personal service company or direct is irrelevant as far as the PC requirements are concerned. However if you do operate through a personal service company and include terms such as accounts or accountancy in the company name be careful – you may be considered to be ‘holding out’ by giving the impression that you provide those traditional accountancy services.

Portfolio careers

Many working in this sector hold a variety of different roles. Using the examples above you might have a part time employment as an FD to a company whilst providing training services to other organisations on a contractual basis. In your free time you might also volunteer as treasurer to your local sports club and act as independent examiner to a charity.

Each role needs to be considered individually to determine whether or not a PC is needed. If any requires a PC then you will also need to take out qualifying insurance that satisfies the ICAEW’s Professional Indemnity Insurance (PII) regulations.

Benefits of holding a PC

There are some benefits in holding a PC. Firstly it means that you don’t need to consider every potential new role to determine whether it needs a PC. That gives you the freedom to accept new roles as they arise and to market your services more widely. You can also promote the fact that you hold a PC as a badge of experience and quality. Note that regulated areas such as audit or investment business have additional requirements.

If you are a sole trader or operate through another structure that qualifies as a member firm you will also benefit from automatic supervision by ICAEW under the Money Laundering Regulations. 

Other considerations

Although you only need to hold qualifying PII if you have a PC it is always wise to consider taking out appropriate insurance to cover the roles you undertake.

Even if you do not have a PC you can use your designatory letters to emphasise your professional qualifications and membership of ICAEW.

Further advice

This is a complicated area of guidance and this short article is to raise awareness. Further information is available online whilst free and confidential advice is available to you from the ICAEW’s Regulatory Information helpline. Simply call +44(0)1908 248250, email informationcentre@icaew.com or use the online webchat facility.