A business relationship is one the firm expects, when contact is first made, to have an element of duration; an occasional transaction is any transaction outside a business relationship. For an accountant the difference decides whether customer due diligence is always required or only above £12,000, whether ongoing monitoring applies, and when the record keeping clock starts. In practice nearly all accountancy work is a business relationship.
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What counts as a business relationship?
Regulation 4(1) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs) defines a business relationship as a business, professional or commercial relationship between the firm and a customer which arises out of the firm’s business and is expected by the firm, at the time when contact is established, to have an element of duration.
The test is the firm’s expectation at the start, not how things turn out. HMRC’s guidance at AMLG11300 (section 13.6) gives examples of when a relationship exists: an expectation of repeat or ongoing business, setting up a customer account, a contract to provide regular services, preferential rates for repeat customers, or a unique customer number. An engagement letter for annual accounts, monthly bookkeeping or a self assessment return every year plainly meets the test.
What is an occasional transaction?
Regulation 3(1) defines an occasional transaction simply as a transaction which is not carried out as part of a business relationship. Under regulation 27(2), a firm such as an accountant must apply customer due diligence to an occasional transaction that amounts to £12,000 or more, whether executed in a single operation or in several operations which appear to be linked.
The £12,000 figure was substituted from 30 June 2026 by the Money Laundering and Terrorist Financing (Amendment) Regulations 2026, which converted euro thresholds into sterling. At the time of writing, HMRC’s AMLG11300 still lists £15,000 for accountancy service providers, so check the legislation itself rather than older guidance.
HMRC’s handbook (ECSH52525) says occasional transactions are uncommon for accountancy service providers, because their work usually has an element of duration.
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Are some services always a business relationship?
Yes. Regulation 4(2) treats a relationship as a business relationship, whether or not it is expected to last, where the firm is asked to provide any of these trust or company services from regulation 12(2):
- forming a firm, which regulation 3 defines to include a body corporate and a partnership;
- selling an off the shelf company, added from 30 June 2026;
- acting, or arranging for another person to act, as a director, secretary or partner, or in a similar role;
- acting, or arranging for another person to act, as trustee of an express trust or as a nominee shareholder.
So a one off company formation for a walk in customer is never an occasional transaction. HMRC’s guidance goes further and says provision of a trust or company service will never be an occasional transaction.
How does due diligence differ between the two?
| Point | Business relationship | Occasional transaction |
|---|---|---|
| When CDD is required | Always, on establishing the relationship (regulation 27(1)(a)) | At £12,000 or more, including linked transactions (regulation 27(2)) |
| Suspicion or doubtful documents | CDD required (regulation 27(1)(c) and (d)) | CDD required whatever the value |
| Timing | Before the relationship is established, with a narrow exception (regulation 30) | Before the transaction is carried out |
| Ongoing monitoring | Required (regulation 28(11)) | Not applicable, as there is no continuing relationship |
| Refreshing CDD | At appropriate times and on changes in circumstances (regulation 27(8)) | Only if the client returns |
| Record retention | Five years from the end of the relationship (regulation 40(3)(b)) | Five years from completion of the transaction (regulation 40(3)(a)) |
Ongoing monitoring under regulation 28(11) means scrutinising transactions throughout the relationship and keeping due diligence information up to date. See ongoing monitoring and AML record keeping.
Where might an accountant meet an occasional transaction?
Genuine examples are narrow. They include generic material sold to anyone with no expectation of follow up, or a single piece of work for someone the firm genuinely does not expect to see again. Even then, the firm should ask how the value of the transaction should be measured. The Regulations do not say whether this means the fee or the sum involved in the client’s underlying transaction, so a firm advising on a £400,000 property sale for a £900 fee should not assume the threshold is out of reach. The cautious course is to apply due diligence to every new client.
Suspicion changes everything. Regulation 27(1)(c) requires due diligence whenever money laundering or terrorist financing is suspected, and the reporting duty in section 330 of the Proceeds of Crime Act 2002 applies to information received in the course of regulated business regardless of the value or the type of engagement. See suspicious activity reports for accountants.
When does an occasional transaction become a business relationship?
Because the test is expectation of duration, a relationship can begin part way through. If a person who came for one piece of advice returns with further work, or agrees an engagement covering future years, the firm should treat the relationship as established from that point and complete full due diligence before going further. A pattern of separate small jobs for the same person is also a warning sign: regulation 27(2) aggregates linked operations, and work that seems to be split to stay under a threshold should itself raise questions.
How does this play out in practice?
Illustration only. A practice sells a fixed price guide to landlord tax to anyone who orders it online. Buyers receive a document and no advice on their own affairs. The practice treats each sale as outside a business relationship and well below the threshold, so it does not carry out due diligence, but its procedures say that if a buyer asks for personal advice, an engagement letter and full due diligence are needed first. One buyer then asks the practice to prepare her property return for the past two years and the coming year. That is a business relationship from the moment she asks, and the practice verifies her identity, considers the source of her rental income and records the purpose of the relationship before starting the work. Its client risk assessment is completed at the same time.
What mistakes do firms make?
- Treating a first year engagement as occasional because the client has not yet committed to future years, when the firm expects to act again.
- Assuming a company formation or nominee service can be occasional.
- Relying on the outdated £15,000 figure.
- Measuring only the fee and ignoring the value of the client’s own transaction.
- Not aggregating linked pieces of work for the same client.
- Forgetting that suspicion requires due diligence and a report whatever the size of the job.
- Starting the five year retention period from the wrong date.
For the full due diligence requirements, see customer due diligence for accountants.
Solar Protect runs fee protection schemes for accountancy and bookkeeping practices. See how our accountant schemes work or read fee protection schemes for accountants.
Related Accountapedia entries
- When client due diligence must be completed
- Trust and company service providers: AML registration
- What to do when a client refuses to provide ID
- A client onboarding process for accountants
- Relying on another firm’s due diligence
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
- legislation.gov.uk: SI 2017/692, regulation 4
- legislation.gov.uk: SI 2017/692, regulation 12
- legislation.gov.uk: SI 2017/692, regulation 3
- legislation.gov.uk: SI 2017/692, regulation 27
- GOV.UK: Manual page AMLG11300
- GOV.UK: Manual page ECSH52525
- ICAEW: 2026 ccab aml guidance for the accountancy sector
- legislation.gov.uk: SI 2017/692, regulation 28
- legislation.gov.uk: SI 2017/692, regulation 30
- legislation.gov.uk: SI 2017/692, regulation 40
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.