Disclosing referral income to clients: an accountant's how-to

Across the professional bodies, the common thread running through referral fee rules is transparency. Whether under ACCA's or ICAEW's Code of Ethics, the expectation is the same: if you earn a fee or commission for introducing a client to another firm, the client should know. Disclosure is the safeguard that neutralises the self-interest threat, because a fee the client is aware of and comfortable with no longer compromises the appearance or reality of your objectivity.

The reasoning is simple. A client places trust in you as their accountant. If they later discover you were paid to point them somewhere and never mentioned it, that trust is damaged — regardless of whether the referral was in their interest. Disclosure protects the relationship as much as it satisfies the regulator, and treating it as a burden rather than good practice is the wrong frame entirely.

Effective disclosure is more than a buried line in your terms. At a minimum, a client should understand:

• That you have a referral arrangement with the specialist or network in question
• That you will receive a fee or share of the fee if they proceed
• That they are free to choose whether or not to act on the introduction
• Whom their information will be shared with, so consent can be given knowingly

You do not have to recite an exact figure, but the client should not be left with a misleading impression of an arm's-length, disinterested recommendation when an arrangement exists. Clarity, not concealment behind technicalities, is the standard.

Timing matters. The right moment to disclose is at or before the point of referral — when you are recommending the client speak to a specialist, not weeks later. Disclosure that arrives after the client has already engaged the specialist looks like an afterthought and defeats the purpose.

There are two complementary places to handle this. First, a standing clause in your engagement letter or terms of business stating that you may from time to time refer clients to third parties and receive a fee for doing so, and that any such referral will be disclosed. Second, a specific mention at the moment of an actual referral, tailored to that introduction. The general term sets the expectation; the specific mention meets the obligation in the concrete case. Relying on the engagement letter alone is thinner than combining both.

Many accountants worry that mentioning a fee will make the client suspicious. Handled openly, the opposite tends to be true. When you explain that you refer only to specialists you have vetted, that you receive a share for making the introduction, and that the client is entirely free to choose, you come across as straightforward. Clients are far more troubled by things hidden from them than by arrangements explained honestly.

A natural framing is to tie the fee to the value: you maintain relationships with vetted, regulated specialists so that clients get a trusted route to help they need, and the arrangement is what makes it worthwhile for you to do so. Positioned this way, disclosure signals confidence, not conflict, and reinforces that you have nothing to hide.

Compliance is easier to demonstrate than to assert. Keep a simple record that disclosure was made — a note on the file, a copy of the email introducing the specialist that references the arrangement, or a logged step within your referral process. If a question ever arises, being able to show that the client was told, and consented to their information being shared, resolves it immediately.

This is where a referral network earns its keep on the compliance side. When disclosure, consent and record-keeping are built into the workflow, you are not relying on remembering to say the right thing each time — the process prompts it and captures it. That turns a professional obligation into a routine, dependable step, and lets you accept your share of the fee, typically a 60-70% member share, knowing the paper trail supports you. Always align your wording with your own body's current Code, which is the governing authority.