When Accounting Advice Becomes Legal Advice: Knowing Your Boundaries
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Every accountant knows the pressure. A client phones in the middle of a crisis, panicked and desperate for answers. They want you to solve their problem now, not tomorrow. You want to help, it’s in your DNA as a trusted advisor. But what happens when the question they’re asking isn’t really an accounting question at all? What if it’s a legal one?
In South Africa, the line between accounting advice and legal advice is not just thin, it’s dangerous. The moment you cross into legal territory without a law degree or a right of appearance, you’re not protecting your client. You’re exposing yourself. And the consequences can be brutal: Lawsuits, disciplinary investigations, professional negligence claims, even reputational damage that could sink a small practice overnight.
The Law Is Clear, Until It Isn’t
Here’s the bottom line: South Africa has rules about who gets to give legal advice. These rules are set out in the Legal Practice Act 28 of 2014, and policed by the Legal Practice Council. Accountants, on the other hand, answer to their own bodies. These aren’t just bureaucratic hoops, they exist to protect the public from getting bad advice from the wrong people.
The problem? There isn’t much case law spelling out exactly where accountants cross the line. Which means you’re left relying on statutes, codes of conduct, and gut instinct. And in that kind of grey zone, one mistake can sink you. The smart play is simple: When in doubt, refer.
When Does Accounting Advice Become Legal Advice?
This is where many accountants stumble. It’s not about the title you carry, it’s about the activity you perform. You can call yourself an “accountant” all day, but the second you draft a settlement agreement, interpret a law as the final word, or advise a client on their legal rights, you are effectively acting as a lawyer.
Consider these examples:
A client asks whether they are legally obliged to pay under a contract. If you answer, “No, the contract is unenforceable,” you’ve just given legal advice.
You draft or tweak a shareholder agreement or a trust deed for a client. That’s legal drafting.
You represent a client at arbitration, mediation, or court. That’s legal representation.
You issue a definitive opinion on whether a transaction breaches the Competition Act. That’s legal interpretation.
All of these activities are squarely within the domain of attorneys.
Now compare that to what accountants can legitimately do: Prepare financial statements, calculate tax, forecast budgets, explain the commercial consequences of alternative contractual terms in plain language, or highlight potential legal issues for a client’s lawyer to consider. Those activities are safe, provided you caveat them properly. The difference is stark: One is about facts and numbers, the other is about rights, obligations, and enforceability.
The Tax Practitioner Exception: What You Can Do
Before you panic that you can’t even answer a tax question, here’s the good news: South African law does carve out a specific exception for registered tax practitioners.
The Tax Administration Act (TAA) makes it crystal clear: Anyone who, for reward, “provides advice to another person with respect to the application of a tax Act” must be registered with both a Recognised Controlling Body (RCB) and with SARS. In other words, giving tax advice is not an accident, it’s a regulated, legitimate activity in its own right. The Legal Practice Act, which ordinarily ring-fences legal services for attorneys and advocates, is trumped here by the statutory carve-out in the TAA.
But (and this is a big but) the exception is narrow. It covers advice on the application and operation of tax statutes. It does not turn you into an attorney. The moment you cross from “is this deductible under the Income Tax Act?” into “does this contract breach company law?” you’ve gone beyond the carve-out. That’s attorney territory.
There are also consequences. Communications with tax practitioners generally do not attract legal professional privilege in the same way attorney–client communications do. SARS can compel disclosure of “relevant material,” and courts have warned that non-lawyer tax advice isn’t shielded. If privilege or litigation is in play, bring in an attorney.
The bottom line: If you’re registered, you may advise on tax Acts within your competence. Beyond that, caveat everything, document your limits in your engagement letter, and refer when the issue touches wider legal rights.
✅ Permitted: Advising whether a receipt is taxable, preparing PAYE returns, explaining ETI compliance.
❌ Refer: Drafting shareholder agreements, advising on succession law, representing a client in litigation.
The Red Flags You’re Crossing the Line
Most accountants don’t realise they’ve wandered into dangerous territory until it’s too late. Some of the classic red flags include quoting statutory provisions as if you’re the final authority, re-drafting legal clauses for clients, or telling someone they should go ahead and sue without involving a lawyer.
Another big warning sign is when a client starts asking you to enforce rights by serving notices, demanding payments, or initiating court applications. These are the moments when you need to stop, breathe, and say, “This is where I refer.”
The Cost of Getting It Wrong
Let’s get real about what happens when accountants ignore these boundaries.
Picture this: An accountant, trying to help a client, drafts a “quick” settlement agreement. They even add wording to cancel all claims. But when the deal collapses, another party challenges the settlement in court. Suddenly, the accountant is dragged in as a respondent, not for bad accounting, but for drafting a legal document that changed people’s rights. Their PI insurer refuses cover, their reputation takes a hit, and disciplinary questions start flying.
Or imagine this: An accountant is asked to help with a director’s exit. They agree to “negotiate terms” and even draft a stern letter threatening legal action. The other side argues that the accountant unlawfully acted as a legal representative, and a formal complaint lands on their desk.
In each case, the accountants thought they were being helpful. In reality, they were creating liability bombs under their own feet.
Protecting Yourself: The Practical Checklist
So how do you avoid becoming the next cautionary tale? The answer is both simple and demanding: Discipline. Every time a client brings you an issue, ask yourself a few questions.
Firstly, is this essentially about legal rights, statutory interpretation, or courtroom procedure? If yes, refer.
Secondly, Will the client treat my statement as the final legal position? If yes, refer.
Thirdly, am I drafting or re-drafting wording that changes rights or liabilities? If yes, refer or co-draft with an attorney.
Lastly, Is litigation or regulatory enforcement likely? If yes, refer early, before the mess escalates.
This self-check should become second nature. And don’t forget your insurance. Many PI policies specifically exclude claims related to unauthorised legal advice. That means if you wander over the line, you may not even be covered.
How to Refer Without Losing the Client
Some accountants fear that referring to a lawyer makes them look incompetent. The opposite is true. The most trusted advisors are the ones who know when to bring in reinforcements. Referring smartly actually protects your client relationship and shows you know how to manage risk.
The safest way to refer is step by step. First, pause and tell the client directly that the matter raises legal issues beyond your scope. Then explain why, frame it as protecting their position. Next, provide options: You can refer them to an attorney you know and trust, they can appoint their own, or you can arrange a joint consultation. Document the referral in writing, update your engagement letter if needed, and get their consent for sharing documents.
Avoid fee-splitting or commissions with lawyers unless the arrangement is explicitly allowed. These practices are heavily restricted by the Legal Practice Council. Instead, focus on building durable, transparent relationships with attorneys who understand your commercial world. Ideally, you should have a panel of two or three go-to lawyers who can step in quickly.
And remember: You don’t have to step back entirely. Stay the commercial lead. You can still provide the financial analysis, commercial options, and scenario modelling while the lawyer handles the law. Clients appreciate this coordinated approach as it saves them time and ensures consistency.
The Engagement Letter: Your First Line of Defence
If you don’t already have a clause in your engagement letters stating that you do not provide legal advice, you are playing with fire.
A simple paragraph can protect you:
“Our services are limited to accounting and advisory services as set out above. We do not provide legal advice and will not act as legal representatives. If any matter raises legal questions, we will advise you to seek legal counsel and, with your consent, facilitate an attorney referral. You should not rely on our work product as legal advice.”
This isn’t just paperwork. It’s your shield. Without it, you’re exposed.
Why This Matters More Than Ever
For many accountants, especially those serving SMEs and entrepreneurs, clients don’t make a neat distinction between accounting and legal advice. To them, you’re the trusted advisor for everything. They come to you first with every problem: Tax, compliance, contracts, disputes, even personal matters. That’s part of the privilege of being central to their financial lives. But it’s also part of the danger.
As competition heats up, especially against larger firms and attorneys encroaching on the business advisory space, the temptation to “do it all” grows. Yet that temptation is exactly what could put your practice in jeopardy. Recognising your limits doesn’t make you weak. It makes you professional.
The Takeaway
The reality is stark: If you want to survive and grow as a small practice accountant in South Africa, you need to know your boundaries. The moment you try to play lawyer, you stop protecting your client and start exposing yourself.
The smart play is simple: Caveat everything, refer early, document always, and keep your engagement letters watertight. Protect your client, but don’t sacrifice your practice in the process.
Your clients need you as their financial strategist, compliance protector, and commercial advisor. They don’t need you to be their lawyer, they need you to bring the right lawyer to the table at the right time. That’s how you stay trusted, relevant, and safe.
And if you’re serious about building this kind of resilience into your practice?
Join CIBA. We’ll show you how to draft stronger engagement letters, build safe attorney referral protocols, and stay compliant while still delivering the value your clients demand.
