A referral fee is not automatically prohibited merely because money changes hands after one professional introduces a client to another. For a Chartered Accountant in practice, however, the answer depends on who receives or pays the amount, what the payment represents, and how the professional work was obtained. The current ICAI Code of Ethics treats a referral between members differently from an unrestricted commission paid to an outside lead generator.
The starting point is the ICAI Code of Ethics, 2026 Volume I, which contains the domestic misconduct provisions, and Volume II, which addresses the ethical threats created by referral-fee arrangements. ICAI states that the revised 13th edition is applicable from 1 April 2026, subject to the separately stated effective date for one management-consultancy item; the ICAI announcement on the revised Code identifies the current volumes.
A referral between two practising CAs can be permitted
Volume I deals with the point directly. Under the discussion of Clause (3) of Part I of the First Schedule, ICAI states that it is not prohibited for a member in practice to charge a referral fee received from another member in practice for referring a client. This is important because a referral fee between practising members should not be confused with every other form of commission or brokerage.
Consider a hypothetical example. CA A handles a client's routine tax compliance but does not provide a specialised service the client now requires. CA A refers the client to CA B, who is also in practice, and the two members agree on a referral fee. The fact that a referral fee exists does not, by itself, make the arrangement prohibited under the specific ICAI clarification on referral fees amongst members.
Permission to pay a referral fee does not end the ethics analysis
Volume II adds a separate layer. Paragraph 330.5 A1 says that paying or receiving a referral fee relating to a client creates a self-interest threat to the principles of objectivity and professional competence and due care. ICAI gives examples that include a fee paid to another Chartered Accountant to obtain new client work for a specialist service and a fee received for referring a continuing client to another Chartered Accountant or other expert.
That means the practical question is not simply “is a referral fee allowed?” A member should also consider whether the financial incentive could influence the recommendation, the choice of specialist, the scope of work or the member's professional judgement. Paragraph 330.5 A2 identifies disclosure to the client of referral fees paid to or received from another Chartered Accountant for recommending services as an example of an action that might address the self-interest threat.
Client disclosure is therefore an ethical safeguard to consider; it should not be treated as a device that converts an otherwise prohibited fee-sharing arrangement into a permissible one. The domestic restrictions in Volume I still have to be satisfied first.
Payments involving non-members require a different check
Clause (2) of Part I of the First Schedule restricts a Chartered Accountant in practice from paying or allowing, directly or indirectly, a share, commission or brokerage in the fees or profits of professional business to a person outside the permitted categories. The clause itself recognises specified categories such as another ICAI member, partners and certain prescribed professional bodies or persons with prescribed qualifications.
Clause (3) works in the opposite direction. It restricts accepting part of the profits of professional work of a person who is not an ICAI member, while preserving permitted profit-sharing or similar arrangements with persons or professional bodies falling within the categories referred to in Clause (2). The Code explains that Regulation 53A of the Chartered Accountants Regulations is relevant to the prescribed professional bodies and qualifications.
This is why a practising CA should not assume that a payment is acceptable simply because the invoice calls it a “referral fee”. If the counterparty is not another practising CA, first establish whether the person or professional body falls within the permitted framework. The label used in an agreement does not replace that classification.
A lead-generation commission can also raise the client-procurement rule
There is another question when the arrangement is designed to bring professional work to the CA. Clause (5) of Part I of the First Schedule treats securing professional business through a person who is neither an employee nor a partner, or by means not open to a Chartered Accountant, as professional misconduct, subject to the arrangements expressly permitted under Clauses (2), (3) and (4).
So an arrangement such as “pay an outside marketer 15% of every professional fee for each client delivered” should not be evaluated only as a marketing expense. The member needs to test both the fee-sharing restriction and the rule on how professional business is secured. A permitted professional arrangement and an unrestricted sales-commission model are not the same thing under the Code.
How to review a proposed referral arrangement before money moves
- Identify the counterparty. Is the person another ICAI member in practice, or a non-member? If a non-member is involved, determine whether the person or professional body is within the categories permitted by the Act, Regulations and current Code.
- Describe the payment by substance. Record whether it is a referral fee, a share of professional fees or profits, brokerage, payment for separately performed professional work, or something else. Do not rely only on the contract heading.
- Check how the client was obtained. If the arrangement is effectively procuring professional business through an outside person, examine Clause (5) as well as Clauses (2) and (3).
- Evaluate the ethical threat. For a referral fee relating to a client, consider the self-interest threat identified in paragraph 330.5 of Volume II and whether it could affect objectivity or professional competence and due care.
- Consider client disclosure and document the conclusion. Where applicable, disclosure of the referral-fee arrangement to the client is identified by ICAI as a possible safeguard. Keep the counterparty status, fee basis, relevant permissions and ethical assessment in the engagement or firm records.
Three arrangements that should not be treated as equivalent
- CA-to-CA specialist referral: ICAI expressly says referral fees amongst members are not prohibited, but the self-interest threat still has to be addressed.
- Fee sharing with a prescribed professional or qualified person: this requires checking the permitted categories and conditions under the domestic provisions rather than assuming all non-CA professionals are covered.
- Commission to an unrelated lead generator: calling the payment a referral fee does not avoid the restrictions on sharing professional fees or securing professional business through a non-employee or non-partner.
The useful distinction is therefore between permission, procurement and professional judgement. First determine whether the proposed payment is permitted under the domestic fee-sharing rules. Then check whether the method of obtaining the work is permissible. Finally, evaluate the self-interest threat that exists when a referral fee relates to a client.
For a live arrangement, use the current ICAI publication page for Code of Ethics, 2026 Volume I and Volume II, and read the relevant clauses and paragraph 330.5 against the actual counterparty and payment terms before agreeing, invoicing or paying the fee.
