Buying an accountancy practice usually means paying for goodwill: the seller’s introduction and recommendation to their clients, not the clients themselves. The price is normally a multiple of recurring fees or profit agreed between the parties, often paid in instalments with a clawback that reduces the price if clients do not transfer. Due diligence has to test the fee figures, the quality of the files and the profitability of the work, while respecting client confidentiality and anti money laundering rules.

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What is the buyer actually paying for?

ICAEW’s helpsheet on buying and selling fees describes a payment by the buyer to the practitioner who will no longer supply the service as a sale and purchase of goodwill. It stresses that purchasing fees is not buying clients, because clients have the right to choose their accountant under section 320 of the ICAEW Code of Ethics. What is bought is a right to an introduction and recommendation, and the chance to sell services to specific clients, along with information about them. In most respects clients’ consent will be needed.

A deal may be for a block of fees, a whole sole practice, or a share of a partnership or company. The helpsheet lists equipment, premises, staff and work in progress as extra points to price separately from the goodwill. The seller’s regulatory steps, including disengagement and run off cover, are covered in selling or closing an accountancy practice; this page looks at the deal from the buyer’s side.

How is a fee base valued?

ICAEW notes that the value of a block of clients is often based on the fees or profits it can generate, with a multiple applied. It gives gross recurring fees, turnover, future fee income and profitability as possible starting points, and says there is no single correct multiple: it is for the buyer and seller to agree. The figures that move a multiple up or down are commercial rather than regulatory:

  • How recurring the fees are. Annual accounts, payroll and tax returns are worth more than one off advisory work that may not repeat.
  • Concentration. A fee base where a handful of clients make up a large share of income carries more risk than many smaller clients.
  • Pricing. Clients billed well below the buyer’s rates may leave when fees rise, so their real value is lower than the fee figure suggests.
  • Fit. Services, sectors, software and location that match the buyer’s practice transfer more easily.
  • Dependence on the seller. Clients who deal only with the departing principal are the hardest to keep.

Payment terms affect value too. ICAEW points out that payment over a period can be considered a loan, so interest may be expected or reflected in a higher price.

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How do retention and clawback clauses work?

ICAEW describes clawback as a reduction in the amount payable if clients are lost or fees turn out lower than expected. It avoids paying for something that does not materialise, gives the seller a reason to make the handover work, and ICAEW recommends agreeing a maximum clawback. In practice the price is often split between a completion payment and deferred instalments, and the deferred amount is recalculated once the fees actually billed to transferred clients over an agreed period are known.

The clause needs precise definitions: which clients count, the measurement period, whether fee increases or new services sold by the buyer are excluded, and what happens if a client leaves because of the buyer’s own service. ICAEW also advises that the agreement deals with what the seller may do afterwards, including acting for sold clients, and may need a formula for compensating the buyer if clients return to the seller. Restrictions on staff who move across are discussed in restrictive covenants for practice staff.

Illustration only. A buyer agrees to pay 0.9 times recurring fees of £200,000, a price of £180,000: £54,000 on completion and the rest in two annual instalments. The price will be recalculated at 0.9 times fees billed to transferred clients in the first 12 months, with any reduction capped at £40,000. Transferred clients are billed £160,000, so the price becomes £144,000 and the instalments fall by £36,000, within the cap.

What should due diligence cover?

ICAEW notes that at the start a buyer often sees only a total fee figure, client numbers by fee band, the services provided and where clients are located. Before detailed information is shared, it says a confidentiality and non poaching agreement is normally signed, including a hold harmless clause so the buyer will not use the information against the seller. The seller usually needs client authority before disclosing confidential client information. ICAEW’s list of areas to check includes:

  • confirmation of the information and detail provided;
  • fee levels and charging structure;
  • the quality of work and files;
  • profitability and overheads.

A buyer will also want to see engagement letters, debtors and unbilled work, complaints and claims history, and staff terms. Gov.uk explains that when a business changes owner, employees may be protected by the TUPE regulations, so staff costs may come with the fees.

Anti money laundering checks cannot simply be inherited. ICAEW states that each firm is responsible for its own customer due diligence, though a buyer may rely on the seller’s checks if the seller gives written consent. Regulation 39 of the Money Laundering Regulations 2017 allows reliance on a third party, but the relying firm remains liable, must immediately obtain the information needed, and must have arrangements to get copies of identification data on request. See customer due diligence for accountants. On data protection, ICAEW suggests legitimate interests will often be the lawful basis for both parties, with clients told of the change where privacy notices do not already cover a sale; more is in data protection for accountancy practices.

What has to happen at and after completion?

  • Client consent. ICAEW says clients must be told and must consent before the buyer does any work, and new engagement letters should be obtained. Audit appointments may need formal resignation and appointment.
  • Files. ICAEW says ownership of client files, and access in the event of a claim, should stay with the seller, with the buyer having temporary custody under a hold harmless agreement.
  • Firm name. The seller’s agreement is needed to keep using the seller’s practice name.
  • HMRC authorisations. HMRC guidance says clients moving between client lists must authorise the new agent again, and HMRC will not move clients between lists.
  • Insurance. ICAEW requires a selling member to have at least 24 months of run off cover for work done before the sale, and advises the buyer not to assume liability for that work.

How is the purchase taxed for the buyer?

For VAT, HMRC’s Notice 700/9 says the transfer of a going concern rules are compulsory. If the conditions are met, no VAT is charged on the assets, including goodwill. One condition is that the buyer must be in possession of a business rather than simply a set of assets, so whether a block of fees qualifies depends on the facts.

A company buyer should not assume a deduction for the goodwill. Chapter 15A of Part 8 of the Corporation Tax Act 2009 treats goodwill, customer information and customer relationships as relevant assets. Under section 879I, where such an asset is acquired on or after 1 April 2019 as part of a business without any qualifying IP assets, no amortisation debits are allowed. Where relief is available, section 879B fixes the rate at 6.5% a year. The accounting treatment is covered in goodwill useful life and amortisation.

What mistakes do buyers make?

  • Paying the whole price at completion with no clawback or retention.
  • Agreeing a clawback without clear definitions of transferred clients and measurement period, or without a cap.
  • Contacting clients or reviewing files before client authority is in place.
  • Relying on the seller’s identity checks without written consent and the arrangements regulation 39 requires.
  • Taking on liability for the seller’s past work.
  • Building a corporation tax deduction for goodwill into the price when section 879I denies it.

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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Related cover: Professional indemnity insurance for accountants and What professional indemnity insurance covers. For the whole practice, see insurance for accountants and fee protection schemes for your clients.

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.