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Bookkeeping - can I withhold records until I am paid

 I am a self employed bookkeeper and one of my long term clients has recently informed me that he has changed his accountants and that they will also be doing his bookkeeping from now on.  We have had a relaxed working relationship whereby, because I knew of his cash flow problems, I did not chase my money and he would pay lump sums when he could.  Unfortunately he now owes me just under £2k and I am very reluctant to release anything to his new accountants until I have been paid in full.

I have already drafted out a letter thinking that I have a right to do this, but now I am unsure if legally I have to hand anything over to them straight away.  I have in my office a complete years worth of invoices, bills etc., PAYE records and I work on my own copy of QuickBooks to do his accounts.  The accountants are asking for all this plus a backup of QB.  I have stated that I would hand over the PAYE records now in order for them to continue with the employee wages.

I have seen from his cheque book that my client has post-dated some very large cheques to HMR&C so I can't see him being able to pay me any time soon, but I am afraid that if I hand over everything he will just bluster and may even stop trading (he trades as self-employed).

Can anyone advise my best course of action?  I don't want to go in heavy handed so I thought I would suggest that he sets up a monthly standing order.  If he did this and then reneged on the payments would I have a better  chance of taking him through the courts?

I feel that I am having to walk on tender-foot as I don't want to put his back up by making him feel that I can't trust him, but on the other hand I have been taken for a ride by other "nice" clients in the past!

Thank you for you time

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Institute

What Institute are you registered as you need to ensure you comply with their guidelines

You can withhold your own working papers, but you can't withhold the clients own records

£2k is a lot of be owed in book keeping fees, I can see you having to chase this through the court

 

 

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The invoices and bills are his. The rest are yours.

Giving him the documents he gave you but don't give him the payrolls you've processed or the QuickBooks file.

Why shouldn't you get paid now? He's wanting you to accept a change in the relationship so there's nothing wrong with you telling him about what you require.

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No Institute

 Not with any institute.

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I have no leverage?

So that means that he gets everything whilst I can hold on to nothing?  He can construct a full year's worth of accounts with his papers, albeit at a cost, but if he is not paying my original costs then it will not actually cost him anything extra except the time it will take and he won't be encouraged to pay me!  I don't feel that I would be professional if I held back on the PAYE stuff as this then involves innocent employees......

 

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You are correct; you don't have much leverage

As Peter says above, the invoices etc belong to your ex client. They are his property and you need to hand them back. You could try exerting a bit of muscle and say in a letter to the new accountant that you have everything boxed up but are just waiting for your outstanding bills to be paid. He may then encourage your ex client to pay your bills. But if he insists, then you have no choice but to hand them back.

I fear however that you are not looking at this with an unemotional head. You say, "I don't feel that I would be professional if I held back on the PAYE stuff as this then involves innocent employees". That, to be frank, is not your problem. If he is not going to pay you then make life as difficult as possible. He will be able to pay his staff. He could get his new accountant to construct a payroll from week 1 with temporary codes etc. He will also be able to produce accounts etc - but certainly wihout your QuickBooks files.

You sound like a thoroughly decent and honest bookkeeper but you have fallen into the trap of not being detached enough from your client. You have allowed a £2000 debt build up which must represent several months' work. You can be polite enough with your clients but they are not your friends. Take it from a cynical old so and so; there is no such thing as friends/loyalty in business relationships. (I am prepared to incur the wrath of WD_CD on this one:):)

Just a quick bit of advice. Put all your clients on monthly standing order arrangements. If a standing order doesn't get paid then stop work until it is. They may grumble and threaten to take their work elsewhere but I bet you they don't. You will gain their respect. and if they do go elsewhere, what have you lost? Nada.

You may have to resort to the courts on this one. I hope not and I wish you luck.

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£2k owed..

That's altogether too trusting.

You may not be able to keep his records but that doesn't mean you have to hand them back anytime soon - procrastination can often be alleviated by a cheque.

I would write to him (nicely) stating the amount still outstanding.

Aim to get a minimum of £500 NOW

Write to his new accountants stating your co-operation will be forthcoming once this minimum fee is paid

Get 3 X post dated cheques for the balance.

When the first one bounces, go through the small claims court- it's easy to do on line.

If the client is 'self emplyed' and not incorporated, he may have assets you can go for.

Don't become a creditor for such a sum in the future!

 

 

 

 

 

 

 

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You have leverage

I don't agree that giving the paperwork back means you don't have any leverage. I doubt your client would pay another accountant to produce a years' accounts knowing that you would still be chasing him for the same work.

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Thank you all for your quick replies.

I have taken on board all your advice and have drafted letters to both my ex client and his new accountants just saying that I would be more than willing to help once the account has been settled.  This temporarily solves the problem of giving up the paperwork right now and hopefully it will produce some sort of settlement in my favour!  

Other than that then I will have to hand over the paperwork when really, really pushed but withhold my own electronic records.  I understand that the paperwork does not have to be in my filed order when returned either, nor do I have to include any of my excel records etc. but let's hope it does not come to that.

 

Thanks again

 

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You CAN hold his records - all of them

I wish I'd seen this thread earlier.  Much of the advice given is incorrect.

In fact you CAN retain everything including his invoices etc.  You simply place a lien on his property until your bill is paid. Further, you can add to your bill reasonable storage charges for holding his property.

You must have "lawfully come into possession of the property held" - which you did of course.

Simply write stating that you are placing a lien on his records until your bill is paid.  His only recourse is to seek a court order for their return and no court would so order without also ordering him to pay his outstanding debts. 

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SteveOH

 Take it from a cynical old so and so; there is no such thing as friends/loyalty in business relationships. (I am prepared to incur the wrath of WD_CD on this one:):)

 

Posted by SteveOH on Mon, 31/05/2010 - 17:04

 

 

Wrath?  No. 

But obviously our experiences are rather different. Probably because we have a different client base and operate in different parts of the Country. 

There is in my experience a huge difference in atitude between townies and country folk, and between different regions of the UK. Maybe that accounts for it.  But as I have said before, possibly more by luck than judgement, the vast majority of our clients are part of "the family" and that attitude is something we have always encouraged, both amongst staff and clients. 

In my experience such a relationship makes it much less likely that you have problems with bad debts.

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I may be a townie but I'm a country boy at heart

(You never know, I could actually live and work in the next village to you).

I knew that you would come back at me on that one CD:) Actually I do agree with you that it is possible to form friendships with staff and clients. Would that it was always the case. It's just that I have had some experiences with misplaced loyalties in the past and I suppose that now I tend to build a fence between myself and clients. I was just trying to say to Sheila26 that it's best to keep a bit of emotional distance between herself and her clients.

I totally agree with you about staff though, as I have said many times here in the past.

I stand corrected about placing a lien on client's paperwork. I'll keep that in mind for the future.

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There is another way.................

 stand corrected about placing a lien on client's paperwork. I'll keep that in mind for the future.

 

Posted by SteveOH on Mon, 31/05/2010 - 23:36

 

There used to be a better way of collecting debts. Many years ago a collegue of mine had a couple of clients. Nice pair of brothers called the Krays. They had a very effective debt collection scheme. Now a couple of Welsh prop forwards can have much the same effect

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Talking of the Kray twins....

I was born in the same "manor" as the Krays - albeit about 20 years later. My uncle told me the story of when he was working in a gent's outfitters as a teenager in Bethnal Green. He served a young Ronnie Kray who ordered about 15 shirts - and paid. He said that Ronnie was politeness personified. I'm sure all the stories about them are untrue. I mean, they loved their mum. And you could leave your front door unlocked in those days.

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Sheila - Read, mark and inwardly digest what WD posted......

viz "In fact you CAN retain everything including his invoices etc. You simply place a lien on his property until your bill is paid. Further, you can add to your bill reasonable storage charges for holding his property.
You must have "lawfully come into possession of the property held" - which you did of course.
Simply write stating that you are placing a lien on his records until your bill is paid. His only recourse is to seek a court order for their return and no court would so order without also ordering him to pay his outstanding debts."

He is absolutely right and I am amazed that no one raised this before. Don't give him back his records until you have been paid. Yes, it will make life very difficult for him but I bet you he finds the money to pay you pdq!!

 
Some clients just take the p**s - yours sounds like one of those - after all, why should he borrow from his bank when he can "borrow" from you interest free?!

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How do you place a lien on property?

 How do you actually go about placing a lien on the paperwork?  Do you have to visit a solicitor or can you do it on-line or something?  I have, on behalf of a client, used the on line County Court process but never this.

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It is easy

as WD wrote - "Simply write stating that you are placing a lien on his records until your bill is paid."

Nothing more needs to be done. When you decide to place a lien on his records, you have done it!!!

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Lien

I thought the legal position was that you could not exercise a lien on accounting documents where this prevents clients from meeting statutory obligations such as companies house filing requirements. 

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You cannot excercise a lien on "Statutory Records"

however since only a Limited Company has statutory records, this does not apply to sole traders and partnerships.

Furthermore, Statutory Records are in fact quite limited and are set out in the Companies Act.

Perhaps Sheila will tell us what her client is - (apart from a bit of a to**er - of course!)

WD - would you care to elaborate? -:) 

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Client **!!

 Thanks again you guys.  Yes - I am a big softie which is not good in business, but I can't live my life being bullish! lol

My ex-client is a Glaswegian Self Employed carpenter with his own workshop and three employees.  I know both his work and his home address.  When he told me of his move to his new accountants/bookkeepers he said, when I inquired,  that he will settle my bills, but I am really uncertain that he will - hence my original posting.

 

I have sent the letter to his home address with a statement of account & copy invoices.  All  I said was that I would contact his accountants with a view to helping them all I can once I am paid in full or a payment scheme is set in place.  I thought that this way I would not antagonise him, nor would I start to threaten withholding anything just yet.  If I then get negative response or vague promises to pay I will then write again telling him that a lien has been placed on his paperwork.  As one of you said, procrastination could keep this going for long enough that both parties tire of it!

I have sent a copy of the letter to his new accountants too so they may decide not to bother with him in any case!

This has been a very interesting thread so once again I thank you all.  Hopefully someone else with the same problem will come across this and be advised accordingly.

In the mean time, any new clients I get will be put straight onto a standing order scheme!  I am lucky that all my other ones pay up on the dot, and even chase me if I am late in invoicing them.  

Here's to you all

Sheila

 

 

 

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Payment plan?

Sheila

I don't think a payment plan is sufficient protection for you.

I would recommend getting paid in full before handing everything over.

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Money laundering Regulation

Just to make sure that you do not expose yourself (as you mention that you are not a memeber of a professional body) have you registered with HMRC for money laundering regulation.  If not you should do so immediately, see http://www.hmrc.gov.uk/mlr/getstarted/register/who.htm

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My ex-client is a Glaswegian Self Employed carpenter

Don't worry about "Statutory Records" then - totally irrelevant in this case.

 

Good luck.

PS - Nothing wrong with being Glaswegian at all!!!!!!!!!!!!!!! 

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Glaswegian

Just politely decline if he offers a final kiss!!

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Naw - nice scot guy

 Oh Yuk - not that nice!!!  lol

 

He is a very dour scot guy who I liked to try to get to laugh - and I managed it now and again lol

No - I had no problem with him during our many years of business association.  He was a nice enough guy - and my my maiden name is Scottish anyway! lol

 

 

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Really nice guy

Just didn't pay you.

-- Kind regards Andy

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Sheila Scottish?

Maybe not!

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Money Laundering - should I register?

Should I start a new thread?  Should I really register for this?

I do not offer tax advice nor do I file Tax Returns of any sort - not even my own!  All my work goes on to the various Accountants.  One offered to take me under his umbrella if I needed to.

When you look at the HMRC flow chart it starts "I provide Tax Advice, do I need to register as an ASP"

http://www.hmrc.gov.uk/mlr/tax-advisor-flowchart.pdf

 

 

 

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Unlawful trading

Others with legal experience can probably advise you better, but I fear that if the client becomes aware that youa re trading as abookkeeper without being registered with HMRC, he may claim that you have no right to the monies owed as you were trading unlawfully.

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Glaswegian again

Not meant literally, I was under the impression that a Glaswegian kiss was a headbutt!!

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Illegal trading ?

Others with legal experience can probably advise you better, but I fear that if the client becomes aware that youa re trading as abookkeeper without being registered with HMRC, he may claim that you have no right to the monies owed as you were trading unlawfully.

 

Posted by bobhurn on Tue, 01/06/2010 - 11:58

 

The OP should indeed register under MLR, however, not being registered does not constitute "illegal trading" and would not affect her right to be paid.  One has no relevence to the other as the registration makes no difference to her ability to carry out the work being charged for.

It would be different if, for exampl, you charged for auditing a companies books and claimed to be qualified to do so when in fact you were not. THAT would negate any charges made as you are unqualified to do the work.

 

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Thanks for the clarification, it was just a worry that I had for the OP. 

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