Forged prior to the banking crisis, the Legal Services Act of 2007 was brought forward to increase competition in the industry by allowing new business models known as “Alternative Business Structures” to provide legal services.
This has opened up the legal services market, allowing innovative accountants to register under the scheme and create additional offerings and value to their clients. For example London accountants, Accounts & Legal, recently received approval from the Solicitor’s Regulatory Authority (SRA), allowing the firm to offer legal advice and services alongside accountancy. Most of the firms that offer both legal and accountancy services specialise in helping larger companies, while Accounts & Legal offers services and packages with small businesses and sole traders in mind.
Having solicitors and accountants under one roof can offer numerous advantages to businesses. Accountants are helpful for following HMRC rules, but a range of business challenges, opportunities, and obligations go far beyond accounting.
The rise of innovative accountants
In the US, the trend of accountants becoming alternative legal service providers is growing quickly, making up a market of £7.6bn a year. A study by Thompson Reuters Legal Executive Institute even revealed 74% of large US corporations are choosing to use ALSPs for specialised legal services.
However, in the UK, adoption has been much more limited. Though the big four have registered to become multi-disciplinary practices, small business accountants are yet to follow suit, making Accounts & Legal’s offering rather unique.
Filling the legal services gap for small businesses
Neil Nichols, Founder of Accounts & Legal, sees it as a positive move forward which will mean that more small businesses get the legal advice that they need.
“As small businesses grow, there is inevitably a need for some legal advice. But many businesses are reluctant to engage a high street solicitor who doesn’t know their business, and so there is a very strong temptation to do without.
Signing a binding contract or dealing with an employment dispute is really tricky without proper legal advice. In addition to the benefit of having all your professional advisors under one roof, there are distinct advantages to taking both a financial and legal view on commercial problems, not least because HMRC rules don’t always align with a company’s other legal obligations.”
In fact, research from the Nesta innovation think-tank, finds that two-fifths of small businesses on the UK feel locked out of access to legal services. 43% of small business owners and self-employed individuals believe that legal advice is geared for big business and that the legal advice sector is not accessible to them. That amounts to almost 2.5 million businesses adrift from legal support.
The Nesta report find that almost 4 out of 5 small business owners want to see more accessible legal services. Around half would like to see digital legal services that make things easier and meet their needs.
So far very few accountancy firms are also authorised to provide legal services. There are only a handful of examples in the whole country – and they tend to be geared up for large corporate businesses rather than small and growing businesses.
The UK still has a way to go to close the small business legal services gap. We are likely to see more accountancy firms offering legal services as part of their service offering. And to encourage further innovation, Nesta has teamed up with the Solicitors Regulation Authority (SRA) to launch the Legal Access Challenge which awards £250,000 in prize money to improve legal access for small and medium businesses.