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 a multitude of reasons – high fees and/or poor service being frequently cited by small businesses.

If and when that happens, the correct procedure involves the issuance of a Professional Clearance Letter (PCL) – something that facilitates the transfer of all documents and info relating to your company’s tax affairs.

This letter is sent by your newly instructed accountant to your old one, and it officially informs them that you intend to move to someone else. However, the switching process is not quite as simple as that, as we discuss in this article.

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 pastures new:

• 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 there may be issues that need to be dealt with along the way. As such, let’s have a 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’re intending 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 to work 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, as it highlights exactly what they’re getting into and ensures that there are no unpleasant surprises hiding 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 by any means, as there are other documents that may be requested, depending on your and your specific circumstances. It’s best to be up front about everything, as they’re going to find out about anything you’re not being 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 aspects like anti-money laundering checks, as well as verification of your identity and business info.

If they then decide to take you on as a client based on what they find, they’ll issue an engagement letter that outlines that they’re taking you on and the services they will provide.

Once this process is complete and you’re officially taken on, you’ll then be providing 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, this 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 give you a prognosis of 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, this 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 info and be prepared to provide it at no cost, except if there’s significant extra work to do in order 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 moving from one accountant to another is not terribly complicated, but there are some non-negotiables that need to be carried out for everything to pass smoothly. Professional clearance is simply one step on the journey, but a very necessary one for all parties involved.

From our experience (we’ve moved accountants several times), the input of the company owner can massively help speed the process up. And remember, ‘professional clearance’ is a professional courtesy, not a legal requirement of switching accountants.

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