Changes to ICAS’ Public Practice Regulations
Read more about changes to the ICAS Public Practice Regulations, which take effect from 2 September 2023.
At its meeting on 2 September 2023, Council approved several changes to the Public Practice Regulations which should be noted by all practice firms.
Alternates
In December 2022, Council approved an amendment to the Public Practice Regulations to require alternates to be in place for all practice certificate (PC) holders who operate as sole practitioners (and not simply those operating clients’ money accounts).
The change was made in recognition of the significant difficulties which can be encountered by clients and family members when an accountant in practice dies without having succession arrangements in place.
After publicising this change, we received some queries and challenges which indicated that the new requirement could have a disproportionate impact in some instances. Council, following the recommendation of the Regulation Board, has therefore decided that a more flexible approach in this area can still achieve the original aims.
The new requirement in Public Practice Regulation 3.20 is worded as follows: “A Practising Certificate holder who is a sole practitioner must certify in writing to ICAS that arrangements are in place to enable the proper processing of their client engagements, with a minimum of disruption, in the event of the incapacity or death of the sole practitioner”.
In this context, suitable arrangements could be satisfied through various controls, including:
- A ‘sole practitioner’ operating via a limited company or LLP where there are other directors/members who would be legally required to continue the company or LLP in their absence.
- A sole practitioner with senior employees who are members of non-Chartered accountancy bodies, or are otherwise not formally qualified, who would run the practice in their absence.
- Contractual arrangements with the client organisation for a sole practitioner who is working as a ‘financial director’/consultancy type role and requires a PC.
Sole practitioners who operate a general practice fully on their own are unlikely to be able to satisfy the requirement without having an alternate. Anyone who needs assistance to comply with the requirement should contact ICAS’ Practice Support team.
As a sole practitioners you must affirm to ICAS on an annual basis that you have arrangements in place, by confirming compliance with the Regulations in the firm’s annual return. More detailed information will be provided in applications for new licences, and as part of the regulatory monitoring process.
Use of the description ‘Chartered Accountants’ by firms
Regulation 7 of the Public Practice Regulations sets out restrictions on the use of the description ‘firm of Chartered Accountants’. Up until now, firms where less than 50% of the principals (directors, partners, etc) are not members of ICAS, ICAEW or ICAI, were not allowed to use the description.
However, Council has agreed that a more flexible approach can be applied, with ICAS’ Authorisation Committee having the delegated authority to allow wider use of the description, on a case-by-case basis.
As set out in the accompanying guidance, the committee will give detailed consideration to the number of principals who are Chartered Accountants, their ownership and control over the practice, and the status of any principals who are not Chartered Accountants (who may require to become ICAS affiliates).
Firms who wish to use (or continue using) the description ‘Chartered Accountants’ should contact the Regulatory Authorisations team if they do not meet the 50% principals threshold for automatic use at regulatoryauthorisations@icas.com.
Holding out as a principal
Regulation 3.4 of the Public Practice Regulations requires principals to hold a practising certificate where the firm provides accountancy or related services.
In recent months, there have been examples brought to ICAS’ attention where individuals in a firm are likely to appear to be principals to clients or other third parties, but are not strictly principals according to the definition in the ICAS Rules (“a sole practitioner or a partner or member or director of an entity”). This might relate to the titles for roles used in different firms, or the way in which employees are presented.
While there is guidance published by ICAS which says that individuals being held out as principals require a practising certificate, Council has decided that this should be formally stated in Regulations, with the provision now covering individuals who are “a Principal in a Firm providing accountancy or related services, or deemed by the committee to be holding themselves out as such a Principal”.
The Regulatory Authorisations team should be contacted as soon as possible if there are any doubts about whether a member should hold a practising certificate.
