At – or near – the top of every limited company contractor’s wishlist for enjoying a stress-free career is to have a reliable, competent accountant.
As in life, things don’t always work out how we want them to.
At some stage, you might find yourself in a situation where you are compelled to look for a new accountant.
Fortunately, the process of changing accountants is relatively simple.
This brief guide looks at the steps involved in the switching process.
Why do you want to change your accountant?
There are many reasons why contractors change accountants. Often, it’s a result of a combination of factors, such as:
Poor customer service
This heading covers a multitude of sins – from not answering emails or phone calls to simply getting the basics wrong.
Changing personnel
Does your nominated contact change regularly, so you can’t build up a working relationship? This can be particularly annoying if you have to re-explain an issue to different people before it’s sorted out.
Missing statutory deadlines
A good accountant will never miss a statutory deadline. For a typical limited company contractor, you have deadlines for your annual accounts, Confirmation Statement filing, and monthly payroll submissions.
Fee hikes
Has your accountant raised their fees without justification, despite committing some of the sins listed here?
Generic advice
They make no effort to provide tailored advice. This is more often the case with larger firms, sometimes known as ‘factory line’ accountants, who don’t go out of their way to help with non-standard requests.
Making errors
Compiling your accounts incorrectly and submitting tax returns containing errors can result in penalties.
Lack of knowledge
Not being clued up on industry-specific tax legislation, such as IR35 and the MSC rules. A thorough understanding of IR35 – in particular – is essential for a contractor accountant.
Poor technology
Most contractor accountants use FreeAgent (or Xero) these days; it makes life a breeze. Does yours?
Or are you stuck with an old-fashioned in-house portal, or even a spreadsheet?
Write to your existing accountant
First, email your current accountant. If requested, attach a letter on your company letterhead.
Advise them that you want to move your accounts to XYZ Ltd and ask them to provide your new accountants with any requested information.
You should also indicate if work is expected to be finalised, such as “I require you to complete the financial year-end accounts ending 31/8/2024.”
Registering with the new accountant
The new accountant will usually send a registration form to capture your personal and limited company information.
By law, they will also carry out an anti-money laundering check on you, so you will typically be required to provide a scan of your passport or driver’s licence, together with a recent utility bill.
You will need to sign a new 64-8 form to authorise the new accountant to deal with HMRC on your behalf.
Authorisation can also be switched over by using HMRC’s online authorisation service.
Be prepared to wait a week or two for authorisation codes to reach your address by post.
Letter of Engagement
The new accountant (if registered with a professional body such as the ICAEW) must send you a ‘Letter of Engagement’.
This sets out the expectations and requirements between the two parties.
Professional Clearance
As a courtesy, your new accountant will write to your current one to request professional clearance.
Here is an extract from a typical clearance request:
We have been approached by Joe Bloggs to act as accountants on behalf of their limited company ABC Ltd. Please, may you advise us if there are any professional reasons why you think we should not accept this appointment.
The letter continues to request copies of accounts and tax records, tax returns and any other information they need to set you up as a new client.
A fresh start
If there are no hold ups, the transfer should only take a few weeks.
Bear in mind that the process can be held up if you have an unresolved dispute with your accountant (e.g. over unpaid fees).
If one of the reasons you’re leaving is due to poor customer service, the switching process may also be delayed.
There is no perfect time to switch accountants, although insiders often suggest you try to move when your previous year’s company accounts have already been completed.
In most cases, there will be some catch up work to complete to bring your old accounts up-to-date.
You may need to negotiate a fee with your new accountant to put your books in order. The contractor accounting industry is fiercely competitive. Some leading firms provide a completely free catch-up service.
