Posted: Tue 20th Oct 2020
You may not appreciate that the title of 'accountant' is not a regulated nor protected term; anyone can set up in business and call themselves an accountant. Rachel Doyle, associate at Gerald Thomas Chartered Accountants, explains the difference between a qualified and unqualified accountant - and why this is so important to business owners.
Some years ago, I gave a presentation to a group of local business owners on the topic of the term 'accountant' being unregulated. When I explained to them that anyone could describe themselves as an accountant, the overwhelming response was shock. Everyone attending my talk assumed that 'accountant' was a protected term, in the same way that 'solicitor' or 'doctor' is. And these were experienced business owners.
It has long been a contentious subject within the accountancy profession, but surprisingly few outside of it realise that there is nothing stopping anyone setting themselves up in business and describing themselves as an accountant. Of course, there are regulations that prevent an unqualified person describing themselves as a chartered accountant or chartered tax adviser, but when there are so many accountancy firms operating within the sector, this distinction is sometimes overlooked.
Accountants with designatory descriptions and letters, awarded by their professional body, are only allowed to use their designations by being members of their professional bodies. This means that the accountant will have had to pass professional exams before applying for membership.
Further, they would need to have demonstrated a certain amount of practical experience. On an ongoing basis, the accountant is required to undertake a certain number of hours each year in ongoing training and development. And this is just on an individual basis; accountancy firms need to ensure that they are compliant with a raft of regulations, which are designed to ensure they are competent to extend professional advice to their clients.
If the accountancy firm falls foul of these regulations, serious reprimands are given by the professional body. The media often reports higher-level scandals, such as the infamous collapse of Enron in 2001, which led to the dissolution of Arthur Andersen - one of the five largest audit and accountancy partnerships in the world.
Conversely, the unqualified 'accountant' is completely unregulated; they may have little technical training, they may not keep up to date with the fast pace of changing tax laws and accountancy standards, and they have no one to answer to if they give a bad service or bad advice.
The regulation of the accountancy profession by bodies such as the Institute of Chartered Accountants in England and Wales is an important protection for businesses that use the services of a chartered accountant.
You wouldn't contemplate getting a filling from an untrained dentist, letting an untrained hairdresser near your hair or banking with an unregulated bank. So why entrust your accounting and tax compliance and business advice to an unqualified and unregulated 'accountant'?
Unqualified 'accountants' tend to be cheaper - in the short term. But you risk costing your business money in the longer term. Consider a scenario where a small business owner needs statutory financial statements and a corporation tax return done. He obtains quotes from several local accountants and goes with the cheapest. After all, his business is not a complex one and he doesn't want to pay out more than he must.
After 10 years, his accountant retires so he engages the services of a new firm of chartered accountants. When discussing his business, his new accountant asks what research & development claims he's made previously. The busines owner is perplexed - he's never heard of research & development tax relief.
It transpires that the business undertook genuine research & development and, happily, has a nice sized claim to make for the current year and previous year, saving the business thousands in corporation tax. Sadly, the relief for many of the previous years cannot be retrospectively claimed, as too much time has passed. The business owner is angry at himself - all that money 'saved' in accountancy fees, yet he has overpaid so much corporation tax, as the old accountant simply didn't know that the relief existed.
We all need experts to help us run our business - solicitors for the legalities, insurance brokers to make sure we're properly covered, and IT consultants to help run our hardware and software. Business owners rely on their outsourced experts and professionals to advise them in complex areas that they cannot profess to be an expert in themselves.
Professionally qualified accountants offer a range of services and products that achieve so much more than just making sure your accounts and tax returns are filed on time. Qualified accountants will be completely up to date with the constantly evolving tax legislation, including expected future changes, enabling you to undertake effective tax planning and claim all relevant tax reliefs.
Firms of chartered accountants often offer a 'cradle to grave' range of services that will meet all of your business needs, from start-ups (think grant and finance applications, advice on the best corporate structure) to succession planning and business sales (advice will be needed in pre-sale grooming, structuring the sale and minimising the post-sale tax). Unqualified accountants seldom offer such a range of services and if they do, they may not be sufficiently professionally competent to do so.
Qualified accountants are required to only offer services that they have been assessed as being competent to deliver. This is an important consideration for business owners, as you do not want someone 'blagging' their way through advising you on an important business deal or tricky tax situation. Especially not when it involves a HMRC inspection!
Professional, qualified accountants are trusted advisers to business owners, and your relationship with your accountant is an important part of running your business. You need to have the confidence that you are entrusting your financial information and needs to someone who is qualified, competent, regulated and acting in your business's best interests.