Accountants can charge whatever fee they consider appropriate, but must explain the basis in writing at the start and must not mislead clients about it. Commissions and referral fees create a self interest threat: under the ICAEW Code you need the client’s explicit written consent to keep any commission received for referring them, whatever the amount, and PCRT requires tax advisers to disclose any commission and its amount or basis.

What must you tell a client about fees?

Section 330 of the ICAEW Code of Ethics deals with fees and other remuneration. The UK requirements added by ICAEW to the international text are specific:

  • R330.4: explain the basis on which fees will be calculated and give an estimated initial fee where applicable, at the earliest opportunity.
  • R330.5: give fee quotes or the basis of fees in writing, before the engagement starts or as soon as possible after. This normally goes in the engagement letter; if there is none, a separate document is needed.
  • R330.7: do not mislead clients about the basis of fees for current or future work.
  • R330.4B.1 and R330.4B.2: provide a fee breakdown if the client asks, with enough detail to show how it was calculated, and explain any fee above a previous quote or estimate and how the excess was worked out.
  • R330.4B.3: take reasonable steps to resolve any fee dispute.

Paragraph 330.4 A1 lists factors that may determine fees: seniority and expertise, time spent, risk and responsibility, the nature of the client’s business, the priority and importance of the work to the client, and expenses properly incurred. ICAEW’s guidance on charging fees stresses these are not a narrow checklist, and observes that clients not understanding how fees were calculated regularly contributes to complaints to ICAEW.

Is it unethical to undercut another firm?

No. Paragraph 330.3 A2 says quoting a lower fee than another accountant is not in itself unethical. The problem arises if the fee is so low that the work cannot be done to the required technical and professional standards, which creates a self interest threat to professional competence and due care. Safeguards include adjusting the fee or the scope, or having an appropriate reviewer check the work (330.3 A4). Where audit or assurance work is won on a fee that is low compared with existing fees, R330.6 requires you to be aware of the perception that quality or objectivity could suffer and to make sure the work meets the relevant standards.

Why are commissions and referral fees an ethical issue?

Paragraph 330.5 A1 says paying or receiving a referral fee, or receiving a commission relating to a client, creates a self interest threat to objectivity and to professional competence and due care. Its examples are a fee paid to another accountant for specialist work while the client stays with you, a fee received for referring a continuing client to another adviser, and a commission from a third party such as a software vendor for goods or services sold to the client.

There is also a legal dimension. ICAEW’s guidance at 330.5B.A1 explains that where you act as agent for a client or give professional advice, you are in a fiduciary relationship and have a legal obligation to obtain informed consent before keeping any commission, fee or other benefit received from a third party for referring that client.

How do you get consent to keep a commission?

R330.5B applies whenever you or an associate receive any fee, commission, payment or benefit in connection with referring your client, regardless of amount. Associates include close or immediate family, business partners and businesses with common ownership or control (330.5B.A2). Consent must be obtained in one of three ways:

Route What is required
(a) Engagement letter clause A clause stating the firm will keep commissions from referrals and that signing the letter gives consent, with examples giving a fair indication of expected amounts. If a commission is significantly more than indicated, write to the client promptly with the amount and frequency, what it was for, how it was calculated, and the payer and payee.
(b) Advance specific consent Written consent before receipt, setting out the same four details.
(c) Disclosure after receipt Full written disclosure of the four details within a reasonable time and a request for explicit written consent. If the client does not respond despite reasonable efforts, consent may be presumed, but you must be able to show those efforts.

If you believe a payment is really a fee for services you provided, not a commission, you should be able to show it is not disproportionate to the services, and it should still be disclosed with details of what it covers (330.5B.A4). Payments made under an agreement to buy all or part of another firm are not referral fees (330.6 A1); see practice succession.

What extra rules apply to tax advisers?

PCRT 2.7 requires a member always to disclose to the client any commission, incentive or other advantage received from a third party relating to the matter on which they are advising, together with the amount or the basis of calculation, and to follow their own body’s rules on disclosing and accounting for commission. See PCRT.

The Chartered Institute of Taxation’s Professional Rules and Practice Guidelines add detail. Where advice will lead to commission, the client should be told no later than when the advice is given, with the expected amount or the basis of calculation (8.3.1). The member must be able to justify the advice for reasons other than the commission (8.3.2), and how commission is treated should be agreed and preferably set out in the engagement letter (8.3.5). Paying an introducer is permitted where lawful, provided you have no reason to believe the introducer put undue pressure on the client, and you have told the prospective client in writing, before accepting instructions, the amount and nature of the payment and who receives it (4.2.1).

What are the rules on making referrals and agencies?

Section 331 of the ICAEW Code covers referrals and agency arrangements. A referral can create a duty of care, which is greater where a referral fee is received (331.4 A1). You must consider whether the third party is fit for purpose (R331.6), must not refer to someone if you know of a better alternative (R331.7), and must disclose any relationship with the third party such as a family connection or an automatic referral arrangement (R331.8). An agency contract must not require you to refer all clients regardless of suitability (R331.11), and you must not give the impression that you are the principal rather than the agent (R331.15).

Introductions for investment business carry extra regulatory limits. The Code explains that a regulated introduction can only be made by a firm licensed by ICAEW as a Designated Professional Body or a firm authorised by the Financial Conduct Authority (331.18 A1).

How does this work in practice?

Illustration only. A firm’s engagement letter says it may receive introducer payments when it refers clients to a payroll bureau and gives an example of around £250 per referral. A client is referred and the bureau pays the firm £1,500.

  • The amount is significantly more than indicated, so under R330.5B(a) the firm writes to the client promptly giving the amount, what it was for, how it was calculated, and who paid and received it.
  • Under R331.8, the firm should already have told the client about its relationship with the bureau, and under R331.7 it should not have referred the client if it knew of a better alternative.
  • If the firm had no engagement letter clause, it must disclose the payment in writing after receipt and ask for explicit written consent to keep it.

What mistakes cause problems?

  • Assuming small commissions do not need consent; the ICAEW requirement applies regardless of amount.
  • Using an engagement letter clause with no indication of likely amounts.
  • Forgetting payments received by a spouse or connected company, which count as received by an associate.
  • Issuing a final bill well above the estimate without explaining the difference.
  • Treating success based arrangements like ordinary fees; they raise separate issues covered in contingent fees for tax work.

Underlying all of this is the threats and safeguards framework, and where a commission arrangement influences advice it can become a conflict of interest.

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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.