Practising certificate Q&A: consultancy

Question

I am a self-employed consultant. I provide consultancy services to a firm of accountants where I used to be a principal. I am not held out as a principal in the firm. The firm of accountants controls and takes responsibility for all of my work. I do not engage with their clients directly. Do I need a PC?

Answer

You do not require a PC. You are not providing accountancy services in a principal/client relationship. However, you should consider clarifying your role in writing with the firm, explaining that your role has changed, and it does not require a PC and that you do not have professional indemnity insurance. It would also be best practice to have a formal subcontractor agreement in place. Guidance is available here.

Question

I am a principal in a number of entities in a consultancy group. The group’s main activity is that of management consultancy on non-accounting matters. However, the group has a small subsidiary, in which I am a principal, that provides tax compliance services to our own staff and some high-net-worth clients. The subsidiary is a small part of the group and is not core to the group activities. Do I need a PC?

Answer

Members who provide accountancy services that are incidental to the non-accountancy related core business services, (or who are principals in a firm  providing accountancy services that are incidental to non-accountancy related core business services), may not require a PC. This can be a complex area and, if in doubt, members should consult the ICAEW Advisory Services team who will discuss your circumstances against strict criteria.

Accountancy services would only be considered incidental if:

• The accountancy services are incidental, complimentary to, integral to, and arising out of the core services being provided which are not, themselves, accountancy services; and
• The accountancy services should not result in a separate income stream nor be charged to clients separately from the non-accountancy core services being provided; and
• The firm does not market itself, or hold itself out as, an accountancy practice, and accountancy services are not marketed as a separate service; and
• The volume and incidence of accountancy services is not substantial.

For any cases where ‘incidentality’ is not considered to be met, a PC will be required.