Accountants for Financial Advisors in York

Why financial advisors need a specialist accountant

A generalist accountant can handle the basics. Where financial advice practices catch them out is in the specific combination of VAT treatment, income recognition and professional structure that comes with FCA-regulated advice.

VAT on financial services is more than “it’s exempt”. Financial advice is exempt from VAT, so you don’t charge VAT to clients on your advice fees. But exemption has a consequence that trips people up: because you’re not making taxable supplies, you can’t reclaim the VAT on your own costs, such as software, office costs and professional subscriptions. The position gets more nuanced when a practice provides both exempt advice and ancillary services that are taxable, and at that point, partial exemption calculations apply. Getting them wrong creates a VAT liability, or means overpaying. We handle the VAT position across your full income mix.

Fee and commission income streams need treating differently. Since the Retail Distribution Review, most IFAs moved to fee-based charging for new business. Many practices still receive trail commission on legacy policies and older clients. Both income streams are legitimate, but they sit differently in the accounts: ongoing trail commission isn’t the same as a recurring advice fee, and the distinction matters for how the income is recognised and how the practice’s revenue base is described to a buyer or valuer.

FCA-regulated status creates a context we understand. FCA authorisation doesn’t change your accounting obligations as a business, but it does create a backdrop. Your financial reporting needs to support, or at least not contradict, your regulatory capital requirements. We’re not FCA compliance advisors, and we don’t hold ourselves out as such. We make sure the accounts don’t create problems for your compliance function, and we work alongside whoever handles your FCA obligations.

Partnership and LLP structures have their own accounting and tax treatment. Many established IFA practices run as partnerships or limited liability partnerships. Partners draw profit allocations rather than salaries. The LLP structure means the practice itself is not a Corporation Tax entity, so each partner is individually taxable on their share. Getting the profit-sharing arrangements, the partners’ tax returns and the relationship between the LLP accounts and individual Self Assessments right takes someone who’s done it before. We handle the whole picture.

Recurring revenue supports your valuation, if the accounts tell the story correctly. For IFA principals thinking about selling or merging, the recurring revenue book, the stream of ongoing advice fees and legacy commission, is the core asset. A buyer will want to see management accounts and financial history that separate recurring income from one-off work, show the stability of the book over time and support a credible multiple. We produce management accounts that give you that visibility month by month, not just at year-end.

How we work with financial advisors

Every practice takes a different mix of services. A sole-advisor firm with a modest client book needs different support to a multi-planner practice with partners, a support team and a serious interest in what the business is worth. We tailor what we handle to where you are now, and adjust as the practice grows or changes.

Staying in regular contact through the year keeps things moving. Whatever we’re looking after, you’ll have a specialist team on hand whenever something specific comes up: a question about the VAT treatment of a new service you’re launching, a partner joining or leaving and the accounting that goes with it, or a client asking about the financial history of the practice ahead of a deal. If HMRC writes to you about anything, forward it on and we’ll either explain it or tell you to ignore it.

Records come through ShareFile, and we work with Xero, FreeAgent and Dext for clients on cloud bookkeeping. When your books are up to date, separating recurring fee income from legacy commission is straightforward rather than a scramble at year-end.

The pre year-end meeting is where we’re most useful. We’ll walk through the year just gone, plan for the next one, and shape your accounts and tax around what’s actually best for the practice: the VAT position, the profit-sharing arrangement if you’re a partnership, and what the recurring income book looks like if a sale or succession is on the horizon. For practices considering a sale in the next few years, the time to start producing the right management accounts is now, not the year before you want to complete: a clean multi-year financial history with recurring income clearly identified is worth more in a negotiation than accounts pulled together at the last minute.

If you’re already working with another accountant, moving over is more straightforward than most people expect, and our guide on how to change accountants walks you through it.