Red flags and questions to ask

1. Why due diligence matters

The typical UK director spends longer researching a new laptop than researching their accountant. The mismatch is odd. A bad accountant can miss tax-planning opportunities worth five figures annually, file late and incur Companies House penalties, or mis-handle an HMRC enquiry that becomes a six-figure settlement.

Twenty minutes of structured questioning at the initial consultation surfaces most problems before you sign an engagement letter. The warning signs below are drawn from client conversations at handover: what directors wish they had asked before their previous firm started the year-end call.

2. Regulatory red flags

• No professional body membership. "Accountant" is unprotected in UK law. If the firm is not ICAEW, ACCA, CIMA, ICAS, or AAT regulated, there is no regulator, no mandatory PI insurance, and no complaints route.
• No anti-money-laundering (AML) supervision disclosed. Every practising UK accountant is legally required to be AML-supervised. Firms that cannot name their supervisor are out of compliance.
• No professional indemnity insurance, or reluctance to confirm cover level. Regulated firms carry PI insurance proportionate to their client fees. A direct question should get a direct answer.
• Unqualified tax advice from unqualified staff. Junior unqualified staff can do data entry; they should not be the person making IR35 status calls or structuring director remuneration.
• Refusal to provide references. Reputable firms will connect you with 1-2 existing clients with a similar business profile.

3. Communication and process red flags

• Unclear point of contact. At some firms the partner sells but juniors service. Confirm who you will deal with day to day.
• Slow or hesitant response times during the sales conversation. Responsiveness rarely improves after you sign.
• No defined response SLA. "We'll get back to you when we can" is not a commitment. A clear policy ("48 hours for routine queries, same-day for urgent") is the minimum.
• No structured onboarding process. A regulated firm should have a documented handover checklist: professional clearance letter, HMRC agent authorisations, software migration, historical data transfer.
• Reactive filing culture. If the firm files right up against deadlines as a matter of course, you are absorbing their backlog risk. Good firms aim for filings weeks ahead of deadline.
• Paper-first or email-attachment bookkeeping. In 2026, any firm that insists you email PDF receipts rather than use digital capture (Dext, Hubdoc, Xero Files) is behind on MTD readiness.

4. Fee-related red flags

• Refusal to quote in writing. A quote that exists only in conversation will drift.
• Fees that look meaningfully below market. For a typical limited company with a single director and modest turnover, total year-one compliance fees below £1,200 often mean the quote covers less than you expect.
• Phone-call hourly charges layered on a monthly fee. Either the fee buys access or it buys compliance deliverables; both is rare and worth questioning.
• Vague "disbursements" line items. Disbursements are specific third-party costs (Companies House filing fees, search fees). A blanket "disbursements" charge with no itemisation is a markup.
• No rule for extra work. Good firms quote in writing first. Bad firms just invoice when you open the January quarter.

5. Tax-Strategy Questions to Ask

These questions test technical depth. The right answer is less important than the answerer being comfortable discussing them:

• "What salary-dividend split are you defaulting your clients to in 2026/27, and why?"
• "If my company had £150k of profit, how would you calculate Corporation Tax, and does marginal relief change the marginal rate of extraction?"
• "What's your view on Full Expensing vs Annual Investment Allowance for a capital purchase this year?"
• "Are there any associated companies in my group? How does that affect the CT thresholds?"
• "How do you handle a director's loan account overdrawn at year-end? When does s455 tax bite?"
• "If I'm contracting outside IR35, what evidence would you want on file to support that position if HMRC opened an enquiry?"
• "What's your process for reviewing dividend distributable reserves before I declare an interim dividend?"

6. Process and People Questions

• "Who will I speak to day to day? What are their qualifications?"
• "What's your year-end timeline? When will my accounts be ready relative to the filing deadline?"
• "Which software do you work with? Are you a certified partner?"
• "What happens if HMRC opens an enquiry? Is representation included or an add-on?"
• "Do you offer scheduled tax planning conversations, and how often?"
• "How do you handle MTD-for-ITSA? What's your client preparedness plan for April 2026?"
• "What would cause you to decline continuing the engagement next year?"

7. Engagement-Letter Clauses to Read

When the engagement letter arrives, these are the sections worth reading properly:

• Services covered. Everything included should be explicit. Anything not listed may be charged separately.
• Fees section. Monthly amount, what it covers, VAT treatment, annual review date.
• Extra work clause. How additional work is priced and authorised.
• Limitation of liability. A number (usually a multiple of annual fee). Unusually low caps are a negotiation point.
• Notice period for termination. 30 days or less is standard; longer lock-ins are unusual.
• Data and software ownership. You should own your Xero/FreeAgent/QuickBooks subscription, not have it sit under the firm's "bureau" account where you can't access it on exit.
• Professional clearance cooperation. A well-written letter commits the firm to respond promptly to any future successor's clearance request.

We can cover this checklist in an initial conversation, including the engagement-letter clauses and our responses to the tax-strategy questions above. See how we handle the switch if you are weighing a move, or book an initial consultation.