This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members consider the practical and ethical implications of ceasing to practice; be it retiring from practice or closing your practice.

Members may also wish to refer to the following related guidance:

• ICAEW Code of Ethics
• Professional Indemnity Insurance
• ICAEW statement on engaging in public practice
• Document retention
• Buying and selling fees
• Outgoing accountant
• Retiring from practice

When ceasing a practice there are many issues to consider including how the practice is going to be closed and member’s plans for their own future.

One way in which members may choose to exit from practice is to organically wind-down. This often involves waiting for long-standing clients to retire themselves and encouraging others to go to another accountant.

Members may decide to close their practice by selling their fees to another practice.

More detailed information is available in our helpsheet on  Buying and selling fees.

When your contract with a client ends, whether through their retirement, them appointing new accountants or you selling them as part of a block of fees; it’s best practice to send a disengagement letter.

This formally ends the relationship and provides an opportunity to avoid any future misunderstandings.

Practical guidance is included on our resource on Client disengagement.

Whichever practice closure route is followed, members should expect to receive professional enquiry from the new or acquiring accountant.

Further information is available on our helpsheet covering professional enquiries from the perspective of the Outgoing accountant.

It is important that members have run off cover after ceasing to practice. This is to cover claims for work undertaken whilst in practice but arising after the practice ceased. This requirement is in a member’s own interests whether or not a future claim is anticipated (PII regulations 2.7 - 2.8 and 6.28 – 6.30).

Where a firm ceases, the principals of that firm must ensure that compliant cover is in place for at least two years, and thereafter they must use their best endeavours to maintain compliant run-off cover for a further four years (PII Regulation 2.8).

Members also need to consider whether a PC is required if they decide to take on other roles once they have retired. For example, members may wish to do provide accountancy services to friends and family or carry out an independent examination of a small charity. Members may also be named as executors in a client’s will or act as Power of Attorney for a client. Each role would need to be assessed individually as to whether as PC is required.

If you continue with a small number of clients who are not exempted as per para 19(g) of the ICAEW statement on engaging in public practice then you will require a practising certificate, regardless of fee income. In this case, ICAEW compliant PII will also be required.

Even after a practice closes, the practice must continue to adhere to AML, GDPR and document retention regulations and requirements.

Paragraph 3.6.18 of the CCAB Anti-money laundering guidance for the accountancy sector specifies that all records created as part of the Client Due Diligence (CDD) process, including any non-engagement documents relating to the client relationship and ongoing monitoring of it, must be retained for five years after the relationship ends.

With regards GDPR requirements, specific guidance including document retention and selling blocks of fees is available in our helpsheet UK GDPR – Client files.

Under Schedule 18 of the Finance Act 1998 (as amended) a company must keep their accounts preparation working papers as may be needed to enable it to deliver a correct and complete tax return for the period until the sixth anniversary of the end of the period for which the company may be required to deliver a company tax return. This is a longer period than required by s387 of the Companies Act 2006 which requires accounting records to be kept for three or six years for private and public companies respectively.

Audit Regulation 3.11 requires registered auditors to keep all audit working papers as required under auditing standards for an audit, for a period of at least six years starting with the end of the accounting period to which the papers relate.

As a general rule, the HMRC Compliance Handbook requires records and supporting documents for income tax, capital gains tax and corporation tax to be retained until the sixth anniversary of the end of the period.

Client’s own documents and files should be returned to clients or handed over to the incoming professional accountants.

Further and more specific guidance can be found within our helpsheet Document retention.

ICAEW would need to be informed when your practice has closed. More guidance can be found on our maintaining your firm's record page.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.