Alternate arrangements for sole practitioners

An alternate is another practitioner who has agreed to step in and look after a sole practitioner’s clients if the practitioner dies or becomes incapacitated. ICAEW makes an alternate compulsory for sole practice registered auditors and for sole principals who hold client money; ACCA requires every sole practitioner to have a written continuity agreement with another firm; ICAS and AAT have equivalent rules. The arrangement only works if it is in writing, gives the alternate real authority and is backed by bank, insurance and access arrangements.

Why does a sole practitioner need an alternate?

When a sole principal dies or loses capacity, nobody else has authority to run the practice. ICAEW’s helpsheet on alternates lists what typically goes wrong: statutory deadlines are missed and clients receive late filing penalties, work in progress loses its value, debts become hard to collect, payroll clients are left without a service, goodwill evaporates as clients move elsewhere, professional indemnity notifications are not made, and staff and premises commitments continue with nobody to manage them. All practitioners have an obligation to ensure their practice is properly supervised and conducted at all times, including cover for holidays and sickness. An alternate turns that obligation into a named person with an agreed role.

When is an alternate compulsory?

For ICAEW, the client money rule sits alongside the wider client money regulations, and the notice of the arrangement must be given in writing before or immediately after the first receipt of client money, or through the firm’s next annual return, and again after any change or cancellation.

Who can act as an alternate?

The answer depends on the work involved.

• ICAEW audit alternates should be suitably qualified members of a Recognised Supervisory Body: ICAEW, ICAS, Chartered Accountants Ireland or ACCA. They need not be a Responsible Individual or hold a practising certificate, but cannot sign audit reports until ICAEW approves them as a Responsible Individual for the practice.
• ICAEW client money alternates need not be ICAEW members, and ICAEW says some firms appoint a spouse. The alternate should be a signatory to the client bank account so client money can be paid out.
• ACCA nominees must hold equivalent qualifications and authorisations, for example a practising certificate, registered auditor status if the firm audits and ATOL registration if relevant.
• AAT continuity providers should be another practitioner or firm in the UK, Channel Islands or Isle of Man with similar competencies and comparable services. A bookkeeping only practitioner is not suitable cover for a firm doing higher risk tax work.

ICAEW suggests weighing skill set, spare capacity at busy times, conflicts of interest and practical access to files and systems. More than one alternate can be appointed for different types of work, provided each one’s scope is clear.

What should the alternate agreement cover?

ICAEW accepts that an agreement can take any form, even verbal, but recommends a legally binding written agreement, reviewed by a lawyer. A written agreement lets the alternate show they are acting with proper authority. ACCA has a model continuity agreement and AAT a template. ICAEW lists points it would expect to see:

• when the alternate’s services are needed and what the role is;
• what is and is not expected of the alternate;
• who else is involved, such as family members or a solicitor;
• access and powers over bank accounts, staff and client information;
• key information such as bank and insurance details;
• the effect on professional indemnity and other insurance;
• conflicts of interest, remuneration, confidentiality and termination.

AAT also requires clients to be told in the engagement letter that a continuity arrangement exists and how their data will be shared, so engagement letters and privacy notices need to match the agreement.

Why is an informal arrangement risky?

ICAEW warns that a simple, non binding agreement may work for holidays and short illness but not for death or mental incapacity. An alternate acting without proper authority risks liability for unauthorised acts, possibly to the beneficiaries of the estate, and that risk may be uninsurable. The informal alternate may also simply decline to act. Banks frequently refuse to let an executor or alternate operate an account until probate is granted, so ICAEW suggests discussing with the bank how it deals with alternate arrangements. Supporting tools include:

• a lasting power of attorney naming the alternate, so they can deal with money and property during incapacity (a sole director must check the articles allow this);
• a mutual support scheme among a group of practitioners, documented so the acting alternate can show authority;
• appointing the alternate as an executor for the business part of the estate, which ICAEW says is not appropriate for an audit alternate.

What happens when the alternate steps in?

For an ICAEW registered audit firm, the alternate must notify ICAEW within ten business days of the death or incapacity. To keep the firm registered the alternate would apply to become audit compliance principal and Responsible Individual, and the firm can apply for a dispensation under Schedule 10, paragraph 6(3) of the Companies Act 2006, giving three months to meet the requirements. A death also creates a casual vacancy for audit appointments. If the alternate is not an ICAEW member, the firm must apply within 14 days for a dispensation to keep using the description Chartered Accountants, and ICAEW’s automatic money laundering supervision ends immediately, so AML supervision has to be arranged elsewhere. In a corporate practice the alternate usually needs to be appointed a director and must watch for insolvent trading as cash flow, debtors and goodwill fall. There is no requirement for the alternate to take over the clients; they may instead manage an orderly handover or sale, which links to the steps in selling or closing a practice.

How does this look for a typical sole practitioner?

Illustration only. Priya is an ICAEW sole practitioner with 150 clients, a weekly payroll bureau and a client bank account, but no audit registration. Because she holds client money, an alternate is compulsory. She agrees a reciprocal arrangement with Tom, a sole practitioner nearby with a similar client base. They sign a written agreement drafted by a solicitor, Tom is added as a signatory on the client account, and Priya names him in a lasting power of attorney for business affairs. She notifies ICAEW, tells her professional indemnity insurer who her alternate is, adds a paragraph to her engagement letters and gives Tom read only access to her practice software. Her partner knows where the agreement is and has Tom’s number.

What mistakes do sole practitioners make?

• Naming an alternate on the annual return without any written agreement or bank mandate behind it.
• Choosing an alternate without the right authorisations, for example a non auditor for an audit practice.
• Not telling family, staff or the bank, so nobody contacts the alternate in time.
• Forgetting to tell ICAEW within the deadline when the alternate changes; the audit regulations require notice within ten working days.
• Not notifying the professional indemnity insurer of the alternate’s identity.
• Never reviewing the arrangement. ACCA recommends checking regularly that the nominee firm’s name, address and authorisations have not changed.

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

Sources

• ICAEW: Arrangements for alternates guidance for sole principals
• ICAEW: Three practice structure considerations
• ICAEW: Engaging in public practice
• ACCA: Monitoring faq
• ICAS: Contingency arrangements helpsheet
• AAT: Aat continuity of practice policy

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.