Selling or closing an accountancy practice is regulated mainly through professional body rules, AML law, data protection and HMRC’s agent rules. A buyer cannot buy the clients themselves, only an introduction, so each client must consent; confidential files need client authority and a lawful basis to share; HMRC authorisations do not transfer to a new legal entity; and ICAEW members must keep run off PII for at least two years after ceasing.

What is actually being sold?

ICAEW’s buying and selling fees helpsheet describes a sale of fees as the sale of goodwill: the buyer pays for an introduction and recommendation to the seller’s clients and the chance to sell its services to them. Clients have the right to choose their accountant, a point the helpsheet links to section 320 of the ICAEW Code of Ethics, so the change cannot be imposed. Before the buyer does any work, each client must be told and must agree.

The helpsheet lists common pricing bases (gross recurring fees, turnover, future fee income and profitability) and notes there is no single correct multiple. Many deals are paid in instalments with a “clawback” that reduces the price if clients leave, and the helpsheet recommends agreeing a cap on clawback.

Illustration only. A sole practitioner sells a block of clients with recurring fees of £200,000 at a price equal to one year’s fees, payable in two equal instalments with clawback for clients lost in the first year. If clients billing £20,000 leave in year one, the second instalment of £100,000 falls to £80,000. The figures are for illustration; ICAEW gives no standard multiple.

How do confidentiality and data protection apply during due diligence?

Under section 114 of the ICAEW Code of Ethics the seller must protect client confidentiality, and ICAEW says client authority would usually be needed before confidential information is disclosed. It is normal to sign a confidentiality and non poaching agreement before detailed information is shared, including a hold harmless clause so the buyer cannot use the information against the seller.

Both firms also need a lawful basis under UK GDPR. ICAEW suggests legitimate interests will often be appropriate, and that clients should be told about the change if the firm’s privacy notice does not already mention a sale. More detail is on our page on data protection for accountancy practices.

How are clients moved across?

  • Write to each client explaining who will take responsibility and asking for consent.
  • Follow formal resignation and appointment procedures where needed, particularly for audit appointments and other regulated work such as insolvency appointments or reserved probate work.
  • Issue new engagement letters from the buyer.
  • Send disengagement letters from the seller, which ICAEW’s closing your practice helpsheet recommends to confirm when services stop and what is outstanding.
  • Expect a professional enquiry from the incoming firm and answer it.

ICAEW also says the seller should keep ownership of and access to client files in case of a claim, even if the buyer takes temporary custody, and that the buyer should not take on liability for work done before the sale.

What happens to HMRC agent authorisations?

HMRC’s guidance on changing agent businesses is strict here. If the business moves to a new legal entity, including a merger that creates a new firm, that entity needs its own agent services account under its own UTR and new client authorisations. HMRC says you must not try to move agent codes from the old legal entity to the new account, and that doing so breaches the HMRC Standard for Agents and UK GDPR. Where a merging firm joins an existing firm that keeps its legal entity, only the incoming clients need fresh authorisation.

On closure, the firm must remove all clients from its agent services and online services accounts and write to the Agent Compliance Team with the cessation date, agent codes and Agent Reference Number. A firm that handled PAYE must post a client list to the Central Agent Authorisation Team. See HMRC agent services account for how authorisations work.

Can the buyer rely on the seller’s AML checks?

Partly. Regulation 39 of the Money Laundering Regulations 2017 lets a firm rely on another regulated person to carry out customer due diligence, but the relying firm remains liable for any failure and must immediately obtain the CDD information and arrange to get copies of the documents on request. ICAEW says reliance on the seller requires the seller’s written consent, the buyer should follow paragraphs 5.4.1 to 5.4.7 of the CCAB AML guidance, and the buyer is responsible for ongoing monitoring from then on. Our page on AML supervision for accountants covers the wider regime.

What run off insurance is needed?

Claims often arrive years after the work. ICAEW’s closing your practice helpsheet says that where a firm ceases, its members must ensure compliant cover is in place for at least two years, then take all reasonable steps to keep compliant run off cover for a further four years (PII Regulations 2.7 and 2.8). The retiring from practice helpsheet adds that run off cover may be provided under the continuing practice’s policy, and if so the retiring member should check that it actually covers them for at least two years. See professional indemnity insurance for accountants.

What records must be kept after closing?

ICAEW reminds members that AML, GDPR and document retention duties continue after closure. CDD records must be kept for five years after each relationship ends. ICAEW Audit Regulation 3.11 requires audit working papers to be kept for at least six years from the date of the audit report. Clients’ own documents should be returned or passed to the new accountants. The helpsheet also notes that a firm still storing personal information electronically after it stops trading will still need to pay the ICO data protection fee, so ICO registration should not be cancelled until the retention periods have run.

What about staff, the practising certificate and the firm’s record?

Where a business or part of it changes owner, gov.uk explains that employees may be protected by TUPE, so their jobs usually transfer to the new employer on their existing terms with continuity of employment. ICAEW must be told when a member firm’s principals change or it closes. A seller who stays on as a consultant without a practising certificate must not be held out as a principal; see practising certificates. The tax side of a disposal, such as Business Asset Disposal Relief and whether a sale is a transfer of a going concern for VAT, needs separate advice.

What are the common mistakes?

  • Sending client files to a buyer before clients have agreed.
  • Copying agent codes into the buyer’s account rather than getting new authorisations.
  • Assuming the buyer’s PII covers the seller’s past work.
  • Relying on the seller’s CDD without written consent or copies of the documents.
  • Cancelling ICO registration and destroying files the day the practice closes.

Solar Protect runs fee protection schemes for accountancy and bookkeeping practices. See how our accountant schemes work or read fee protection schemes for accountants.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.