Engagement letters for accountants: a UK checklist

Why do engagement letters matter for UK accountants?

An engagement letter is the contract between your practice and the client. It records what you will do, what you will not do, what the client must do and what it will cost. When a dispute arises, it is usually the first document anyone reads, and a vague letter almost always works against the firm that wrote it.

HMRC’s own expectations point the same way. Section 4.3.3 of the HMRC Standard for Agents says agents should make their terms of engagement as clear and simple as possible, and in particular should "agree the terms of engagement before starting to act for the client, and get confirmation that the client accepts them". It also says agents should offer a reasonable cancellation period, explain how they are paid, and make clear the rights of both sides to end the arrangement early.

Your professional body will have its own requirements and model wording, and those take priority for members. This checklist is about the practical side: what to include, how to deal with individual clients, and how to keep letters current without drowning in paperwork.

Which clauses should every engagement letter include?

Whatever template you start from, check the finished letter against this list. Each row is something that has caused disputes when it was missing.

Limitation of liability clauses deserve particular care, because their enforceability depends on how they are drafted and presented. Take advice from your professional body or a solicitor before relying on one.

Do individual clients get a 14-day right to cancel?

Often, yes, and this is the clause most practice templates leave out. Where your client is a consumer (an individual acting outside their trade, such as an employee with rental income or a pensioner needing a tax return) and the contract is made at a distance or away from your premises, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 apply.

Three regulations matter most:

• Regulation 30: for service contracts, the cancellation period ends 14 days after the day the contract is entered into.
• Regulation 31: if you do not give the required cancellation information, the period is extended and ends 12 months after the date it would otherwise have ended.
• Regulation 36: you must not start the service within the cancellation period unless the consumer has made an express request, and for an off-premises contract that request must be on a durable medium. If you start without one, the consumer bears no cost for the service supplied during the cancellation period.

A sole trader or limited company engaging you for their business is generally not a consumer for this purpose. A sole trader who also asks you to deal with a personal matter may be both, so take care with mixed engagements.

Worked example: a new client signing remotely in January

On 8 January, Mark, an employee with a buy-to-let flat, contacts a practice in Bristol through its website. He needs his 2025–26 return, which is due by 31 January. The practice quotes £450 and emails him a link to sign the letter online. He signs on 9 January.

Because Mark is a consumer and the contract was made remotely, his cancellation period runs to the end of 23 January. The practice cannot wait that long, so the signing page includes a separate tick box: "I ask you to start work now, before the 14-day cancellation period ends. I understand that if I cancel, I will pay for work done up to that point." Mark ticks it, and the practice keeps the signed letter, the tick-box record and a copy of the cancellation information in his file.

On 15 January Mark changes his mind. Because he made an express request, the practice can charge a proportionate amount for work done: say three of an estimated six hours, or £225. Without that request, and with no cancellation information given, Mark could have cancelled months later and paid nothing for work already delivered. The difference is one paragraph and one tick box.

How do you keep the letter stable as services change?

The most efficient structure is a short core letter plus schedules. The core letter holds the parts that rarely change: parties, general terms, data protection, AML, liability and termination. Each service gets its own schedule: Self Assessment, annual accounts, VAT, payroll, bookkeeping.

When a client adds payroll, you issue a new payroll schedule for signature rather than a whole new letter. When your fees change, you update the fee schedule. The client signs less, reads less and is more likely to notice what has changed.

Keep a version number and date on every schedule and on the core terms. If a dispute arises about the 2025 accounts, you need to show which version of which schedule applied at the time. Store every signed version, never overwrite one, and link each to the job it covers. If you also run fixed monthly fees, our guide to MTD quarterly updates shows how scheduled services can be broken into recurring jobs.

What goes wrong when the letter does not match the work?

Most engagement letter problems are not missing clauses. They are letters that were accurate once and drifted. Three patterns account for most of the trouble.

• Scope creep without paper. The client asks for help with an HMRC letter, a mortgage reference or a VAT question. You help, because they are a good client. Nothing is written down, so the extra work is either unbilled or billed against a letter that never mentioned it.
• Silent exclusions. The letter says "preparation of your tax return" but not who checks whether the client should register for VAT or Making Tax Digital. When something is missed, both sides assumed the other was watching.
• Stale responsibilities. The letter gives the client a date to send records, but nobody enforces it, so in practice the deadline does not exist.

The fix is a habit, not a better template: every time a client asks for something outside the schedule, reply with a short note confirming whether it is in scope, and if not, what it will cost. That note, saved on the client file, does the job of a mini-schedule, and it gives you the evidence to update the letter at the next annual review.

Can engagement letters be signed electronically?

Yes. In England and Wales, the Law Commission concluded in 2019 that an electronic signature is capable in law of being used to execute a document, provided the signer intends to authenticate it and any formalities for that document are met. The government accepted that conclusion and set up the industry working group on the electronic execution of documents to deal with practical questions.

Engagement letters are simple contracts with no special formalities, so an e-signature is well suited to them. What matters is evidence. A good signing process records who signed, when, from which email address and what exactly they saw. Keep the signed PDF and the audit record together on the client file.

Two practical points. First, if the client is a company, make sure the person signing has authority to bind it, and record their role. Second, send the client a copy of the signed letter automatically. A letter the client cannot find two years later does little to settle a disagreement.

When should you reissue an engagement letter?

A letter signed in 2019 for a sole trader who incorporated in 2023 is a letter for a client you no longer act for. Reissue, or issue a new schedule, whenever one of these happens:

• The scope changes: a new service, a service you stop providing, or a new tax regime such as Making Tax Digital for Income Tax.
• The client entity changes: incorporation, a new partner, a death or divorce affecting a joint engagement.
• Your terms change: new fees, new payment methods, a new privacy notice or new liability wording.
• The rules change: when your professional body updates its model wording.

Beyond those triggers, review every client’s letter once a year. A simple rule works: the annual review happens when you start that client’s year-end work, and nothing is started until the letter on file matches the work about to be done.

How Zaquil handles engagement letters

In Zaquil, the engagement letter is a step in the client's onboarding job, not a separate admin task someone has to remember.

Your core terms and each service schedule live as templates in the firm's Documents hub. When a new client job is created from a template with a checklist, the letter step follows your identity checks and comes before any chargeable work, so the order is built in.

The client receives the letter in their secure client portal, reads it, and e-signs it there. They get a signed PDF with a signing certificate showing who signed and when, and the same file is saved to their record on your side. For individual clients signing remotely, you can include your cancellation information and express-request wording in the document they sign, so the evidence sits together.

Annual reviews become recurring jobs with a deadline tied to each client's year-end work. Automations handle the follow-up: when a letter is still unsigned after a few days, send a reminder from the shared inbox; when it is signed, move the job to the next stage and create the first work task.

The accounting and tax setup includes onboarding job templates you can adapt to your own letter, and the pricing page has a 14-day free trial with no card needed.