Accountants may face disciplinary action for managing estates without a probate licence

New guidance issued by the Institute of Chartered Accountants in England and Wales (ICAEW), on 1st August, could see accountants facing disciplinary action if they manage estates on behalf of clients without being licensed or authorised.

As probate itself is a reserved activity, as defined by the Legal Services Act 2007, firms carrying out probate activities require authorisation or a licence from an approved regulator or licensing authority, of which the ICAEW is both. With probate and estate administration being so closely aligned, accountancy firms have been involved with matters such as tax advice without necessarily considering whether their activities fell within the rules and, thus, required a licence under the Act.

Having taken legal advice on the matter, the ICAEW has issued guidance to its members giving them a clear framework in which to operate. Members acting outside the guidance, which took effect from 1st August, will face disciplinary action.

The overarching principle applied is where a member or member firm engages in estate administration services (be it as executor or acting for the executor) and also undertake probate related activities which are managed as a process and a fee is involved, then the practitioner should be licensed for the reserved service.

The guidance confirms that accountancy practices without a licence cannot:

  • Handle the whole probate process
  • Be pro-active in the process (all activities need to be managed by the executor)
  • Submit the PA1 (although they can assist with the completion, provided that the executor is in complete control of it)
  • Sign or submit the IHT400 or IHT205, unless they have express authority from the executor who must have seen it prior to submission (they can fill it in and calculate the numbers)
  • Assemble the documentation for submission
  • Draft the oath
  • Swear the oath

However, they can:

  • Negotiate with HMRC on subjective matters on the IHT400 and IHT205 (provided these are under full control of their client or legal advisor)
  • Advise the client on the treatment of assets and liabilities in the IHT400 (again where the client has full control and is responsible for the submission)

In comparison, an accountancy practice with a licence or authorisation can carry out all of the above activities mostly without limitation. The only limitations on authorised practices is that they cannot carry out contentious probate matters and the oath can only be ‘sworn by’ and not ‘sworn to’.

So far, the ICAEW has issued just over 100 probate licences to accountancy firms.

For further guidance firms should contact the ICAEW

Today's Wills and Probate