Switching accountant: what actually happens, step by step

People stay with an accountant they are unhappy with because they imagine the move is messy. In practice it follows a fixed sequence, and most of it happens between the two firms without you. This is the sequence, what we do at each step, and what it asks of you.

Step one: the engagement, and what we need from you

Before anything else we agree what we will do and what it costs, in writing, as a fixed fee. Because we are an ICAEW-regulated firm we also have to verify your identity and, for a company, the identity of its owners, under the anti-money laundering rules. That means a passport or driving licence and a proof of address. Then two authorisations: one for HMRC, through the agent services account, so we can see and file your tax affairs; and one for Companies House, through the company’s authentication code. Your time so far: about an hour.

Step two: professional clearance

We write to your existing accountant. The letter, usually called a professional clearance letter, asks whether there is any professional reason we should not act for you, and asks for the information we need to take over. You tell your old accountant in your own words that you are moving and authorise them to reply. Under the ICAEW code of ethics they are expected to respond promptly and to hand over the records that belong to you. Most firms reply within a fortnight. A few do not, in which case we send a reminder and, after a reasonable period, proceed with care on the basis of what you can give us.

Step three: the handover

What comes across, and why it matters:

• The last set of accounts and the trial balance behind them, with the fixed asset register and the corporation tax computation, so the opening balances in our system match the closing balances in theirs.
• The last two tax returns, company and personal, with the workings.
• The VAT position: the scheme you are on, the partial exemption method if there is one, and the last four returns.
• Payroll year-to-date figures for every employee, the pension scheme details and the RTI submission history.
• The statutory registers, or an admission that there are none.
• Access to the accounting software. If the subscription is in the old firm’s name, it is transferred to you, not to us. You own the data.

If the old firm kept the books on a desktop system or in their own ledger, we rebuild the opening position in yours, and we tell you what could not be reconciled.

Step four: the review of the last two years

Before we file anything new, we read the last two years of filings. Two years is the practical limit because it is roughly how far the amendment windows run: a company tax return can be amended for twelve months after its filing deadline, and a personal return for twelve months after the 31 January deadline. Beyond that, correcting an error means a formal claim or a disclosure rather than an amendment.

What we look for, and what we most often find:

• The wrong accounting framework, typically FRS 102 Section 1A applied where FRS 105 was available, or the reverse, which changes the disclosures and sometimes the tax.
• Reliefs missed: capital allowances not claimed, losses not carried back, the Employment Allowance not claimed, pension contributions not relieved.
• Director’s loan accounts that are overdrawn without anyone having noticed, and the s.455 charge that follows.
• Dividends paid without paperwork, or without distributable reserves to pay them from.
• VAT: the flat rate percentage for the wrong sector, input tax claimed on cars, exempt income treated as taxable.
• Payroll: statutory pay miscalculated, benefits never reported on a P11D.

Where we find something, we tell you what it is, what it costs to fix, and what happens if it is left. We do not fix things silently, and we do not criticise the previous firm for the sake of it. The corporate tax health check and the amendment of returns prepared by others are the two pieces of work this most often becomes. Where the accounts themselves are wrong, it becomes a prior period correction.

Timing

There is no bad time, but there are cleaner ones.

• Accounts and corporation tax. The cleanest handover is just after a year end has been filed: the old firm finishes the year, we start the next. If the year end is close and nothing has been done, we take the year over, with the catch-up fee agreed first.
• VAT. Move after a return has been filed, so nobody is mid-quarter. The MTD authorisation for VAT is separate from the one for other taxes, and we do both at the same time.
• Payroll. 6 April is tidiest, because there are no year-to-date figures to carry. Mid-year is routine provided the figures come across, and our payroll setup and migration work is built for it.
• Self Assessment. Any time up to about November for that January’s return. Later is possible, but leaves less room for the review.

What it costs you in time

Signing the engagement letter and sending identity documents: twenty minutes. Authorising us with HMRC and Companies House: fifteen minutes. Telling your old accountant: an email. One call with us to go through what we have found: thirty to sixty minutes. Everything else is between the two firms.

The worries we hear most

Your old accountant will be offended. Professional clearance is a routine letter that every firm sends and receives. Nobody is offended.

You owe them fees. Settle what you owe. A firm can hold on to some of its own working papers until it is paid, but your books, records and statutory documents belong to you, and the professional rules say so.

HMRC will notice. HMRC sees a change of agent. It is not a trigger for anything.

It is the wrong time of year. The right time is when you have decided.

The books are a mess and you are embarrassed. That is the most common reason people move, and it is the work we do most.

If you are thinking about moving, we offer a 30-minute call at no charge. Bring the last accounts and the last tax return, and we will tell you what the handover would involve and what we would want to look at first.