Changing accountants – how the process works in practice

As a limited company owner, there may come a time when you decide to change accountants. This could be for many reasons – high fees and/or poor service being frequently cited by small businesses.

If and when that happens, the correct procedure is to issue a Professional Clearance Letter (PCL).

This facilitates the transfer of all documents and information relating to your company’s tax affairs.

Your newly instructed accountant sends this letter to your old one, officially informing them that you intend to move to someone else.

However, as we discuss in this article, the switching process is not quite as simple as that.

So, what exactly is involved in switching?

In an ideal world, the task of moving accountants should be a relatively quick and painless one, with the following steps typically ensuing after you’ve decided to leave your current accountant for new pastures:

• Instructing your new accountant (read our article on choosing an accountant first).
• Providing your new accountant with authority to act on your company’s behalf.
• Ensuring they’ve sent over a letter of professional clearance.
• Reply to any disengagement letter you may receive.
• Be proactive if there are any delays in the switching process.

Of course, we don’t live in an ideal world, so issues may need to be dealt with along the way.

Let’s look at some other things you are likely to encounter during the switching process.

You can expect a disengagement letter

When your accountant discovers that you intend to move your tax affairs to someone else, they will send you what’s known in the industry as a disengagement letter.

In it, you’ll find your stated reasons for leaving and details of tax affairs you might want them to continue working on—which may be the case if you’re in the middle of your returns.

The disengagement letter is primarily for your new accountant’s benefit. It highlights exactly what they’re getting into and ensures that there are no unpleasant surprises hidden further down the line.

At this point, the new accountant is looking for misleading or ‘dodgy’ behaviour, such as fraud or tax evasion.

If anything like this is discovered during this stage, it could be enough to deter them from taking you on as a client. As such, they’ll ask for things like:

• Your full tax records
• Copies of your bank accounts
• Any tax returns you possess

This is not an exhaustive list, as other documents may be requested depending on your specific circumstances.

It’s best to be upfront about everything, as they will find out about anything you’re not completely truthful about sooner or later.

What checks will your new accountant conduct?

The basic checks new accountants will do on you as an individual include anti-money laundering checks and verification of your identity and business information.

If they decide to take you on as a client based on what they find, they’ll issue an engagement letter outlining the services they will provide.

Once this process is complete and you’re officially taken on, you’ll provide them with the authorisation (a 64-8 Form) they need to talk to HMRC on your behalf. While this used to be a paper-based process, it is mostly now done online.

How long does it take to switch accountants?

Generally speaking, moving from one accountant to another should take a few weeks.

In the event of a delay, your accountant should be able to explain why the holdup has occurred and when it will likely be resolved. Obviously, this is on a case-by-case basis.

Your old accountant is duty-bound to provide the required tax accounts when requested; however, there is no guarantee that they’ll cooperate in the way you’d like them to.

That said, so long as your new accountant has all the relevant information about you, they should still be able to move forward – even if your old accountant isn’t playing ball.

The outgoing account should understand the need to provide the required information and be prepared to provide it at no cost, except if significant extra work is required to supply what’s needed.

If everything is kept cordial, however, there’s no real reason why there should be any major problems.

How to ensure your switch goes without a hitch

As we can see, the process of changing accountants is not terribly complicated, but some non-negotiables need to be carried out for everything to pass smoothly.

Professional clearance is simply one step on the journey, but it is a necessary one for all parties involved.

From our experience (we’ve moved accountants several times), the company owner’s input can massively help speed up the process.

And remember, ‘professional clearance’ is a professional courtesy, not a legal requirement of switching accountants.

You can download a professional clearance letter template from the ACCA here (.doc).

If you find yourself in this position and need a new accountant you can trust, look at our list of partner accountants, who will be happy to help you.