Legal Checks

In order to be able to legally do someone’s accounts as a freelancer, bookkeepers (and others in the financial services industry) have to be registered with an agency who will supervise them under the Money Laundering Regulations 2007 (which have subsequently been updated a few times). In my case, as someone who is a bookkeeper by experience rather than qualification, I am registered with HMRC. This means I pay an annual fee to them (£300 a time of writing), and they can investigate my work at any time without notice.

If you’re thinking about becoming a freelance bookkeeper, there are other agencies that can supervise you, such as the ICB. You have to comply with their admittance criteria and pay a fee but once you’re in, you can practise legally.

Once you are registered and start gaining new clients, as a result of the Anti-Money Laundering regulations (AML) you are legally required to carry out background checks on them. These are the same checks that are done when you open a new bank account or take out other financial products. Clients must provide certain documents and once you have them there are checks that you must do. By chance, I stumbled across a fantastic website which acts as a conduit to do all this for you. It’s called Veriphy and is easy to use and reasonably priced. Every time I take on a new client, I log in, do the checks I need to do, pay my invoice and then everything is kept above board. There’s no subscription, you just pay for the checks you do, and the whole system is very transparent.

As a bare minimum, you should complete an ‘anti-money laundering check’, but there might be other checks you want to do as well, depending on the nature of the business and the people involved. You will need to carry out a check for each company director, or partner. I print off paper copies of the results of the checks and keep them safely with the id copies should my work ever been audited.

The other huge selling point of Veriphy for me, other than their great customer service, is that they provide online AML training. For an upfront fee (£30+VAT at time of writing) you have access to a full online training package. Go to the website and register, and you will be sent login detail and an invoice. Easy. This is another compliance check you need to complete to show you understand what money laundering is, and therefore so you are able to spot it if you are ever faced with it. It’s a training and testing tool, and you do it in your own time. Find out more here.

The other product you will need if you are starting up as a sole trader, no matter what business you are going into, is Professional Indemnity insurance. This is not a legal requirement but you’d be daft to run a business without it. It will insure you against making a mistake which then costs your client money to resolve. If you’re a bookkeeper, you may make a mistake on a VAT return or when calculating the tax owed by a company, which may then lead to fines, and in the worst case scenario, legal costs if the case goes to court. Your insurance will make sure that any costs are paid without the client coming after you for anything outside the business eg your house, which being a sole trader would allow.

Lots of places can provide cover. The biggest one is probably Simply Business who provide all sorts of business insurances, but smaller brokers do them too. They also do a cracking newsletter, so sign up for that even if you never get insurance from them. I would highly recommend Evergreen Insurance, who can also provide multiple insurance products for home and business, as well as donating money to wildlife charities.

July 2019 Addendum: Under the MTD paradigm, if you need the ability to be able to file VAT Returns on behalf of your clients, or set your clients up for MTD, you must register for a tax agent account with HMRC. In order to be able to do this, you must be registered somewhere for AML supervision, as you will need to provide details as part of the registration process. There is no additional cost for becoming a tax agent but it is a bit of a drawn-out process. Some accountancy software (I’m looking at you, Xero) won’t allow you to even see the VAT Return page unless you have linked your account.