What is claw back?
A vital concept to understand when buying or selling an accountancy practice — updated for 2026
Virtually every practice sale includes a clawback clause in the Sale Agreement — a risk-sharing mechanism between buyer and seller. It protects the purchaser if clients leave during a specified period (usually the first year), which would otherwise mean the business turns out to be worth less than what was paid for it.
How it typically works
When a practice is sold, a proportion of the price — commonly around 50% for micro-practices — is paid on completion, with the remainder paid a year later. On larger deals, payment is often staged across three instalments: roughly a third upfront, a third on the first anniversary, and the final tranche on the second.
Take a vendor selling for £100,000 on a one-year clawback at a multiple of 1.0x: they’d receive £50,000 on completion and £50,000 a year later. If the fees actually retained at the first anniversary turn out to be only £90,000, the purchaser can net off that shortfall and pay a reduced second instalment of £40,000. Before any reduction is agreed, the vendor has a right of discovery — the right to look at the relevant client files to satisfy themselves the claimed shortfall is genuine.
A shortfall is defined as fees that were sold and purchased but haven’t materialised, and aren’t likely to — which can include situations where, for instance, a client simply hasn’t made their books available so the work could be completed. Many agreements also include a courtesy clause: if a client indicates they’re planning to move to another accountant, the purchaser tells the seller, giving them a chance to try to recover the relationship — since neither party benefits from losing that fee income unnecessarily.
It’s worth knowing this cuts only one way: if the new owner ends up billing more than they purchased — for the same work, for the same clients — the seller can’t normally claim the difference back (sometimes informally called a ‘claw-forward’). Having bought the goodwill, the purchaser is entitled to benefit from any growth in the business from that point on.
Why the aggregate matters, not the individual client
It generally makes sense for a seller to sell the aggregate sum of fees — say, £100,000 — rather than a fixed list of individual clients. That way, clients who move to a different accountant or are lost are automatically offset by clients whose fees have grown, without either party having to argue over which specific client fell into which bucket. New clients the purchaser wins after completion don’t count toward this calculation either way — they arrived as a result of the goodwill already purchased, and belong to the purchaser outright.
Negotiating the terms
A vendor can limit their downside by including a clause preventing the new owner from raising fees on transferred clients by more than an agreed percentage during the warranty period — reducing the risk that a steep price rise triggers client losses that then count against the seller. Legal advice is worth taking before signing any Sale Agreement that includes a clawback clause; broadly, it suits the purchaser to negotiate for the longest clawback period possible, and the seller for the shortest.
How much room a seller has to hold their ground here depends on market conditions at the time: where buyer competition for a particular practice is strong, sellers tend to be able to resist a clawback extending beyond the first year; in a market where buyers have more choice, sellers may need to be a little more flexible. Either way, fees lost in the first year are normally deducted pound-for-pound, multiplied by the sale multiple, from the relevant instalment. It’s standard practice for the Sale Agreement to require the purchaser to notify the seller in writing of any intended claim before the first anniversary, at which point the seller’s right of discovery applies.