Retention of client records

Retention of client records

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Hi

What are the rules regarding retention of client records in order to obtain payment from a client.

I have a client that will not pay but yet still want us to do work, we have now refused to do any more work until payment is received, the client now wishes to collect all the books and records that we hold.  Are we able to retain these until payment is received, the client is a limited company.

thank you

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Man of Kent
By Kent accountant
20th Jun 2012 09:52

Careful

Which accountancy body are you a member of - what do their guidelines say?

I think (others can confirm) that the general guidance is that you shouldn't withhold information which will prevent the client from operating their business. Other than that, ignore their requests until they pay.

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By The Rogue
20th Jun 2012 11:30

Find a solicitor

and sue them.  My business does this and the (ex) customer generally picks up the tab.  Unless they go bust first.

 

Failing that you could give them back their records but leave notes in for the new accountants to find about how good they are at paying...

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By Ken Howard
20th Jun 2012 12:22

Depends who legally "owns" the records

If the client has given you bank statements, invoices, cq stubs, etc., then they are the legal property of the client, and I understand you must allow the client to collect these if they ask.

However, the "books" you have created, i.e. computer data, printouts, or working papers, etc., remain your legal property until they have been paid for, so you are at liberty to keep those until the client has "bought" them from you.

The exception is the likes of VAT return workings and payroll records where you have to give the client the supporting documents to support the submissions made.  Also for limited companies, nominal ledger (for past years submitted), and minute book etc.

So, for current periods, where nothing has been submitted, your documentation and reports etc belongs to you and the client can't demand it until they've paid you for the work on it. 

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By twj4789
20th Jun 2012 14:04

Good advice

Thanks for the above, it is something I have often wondered. Our current stance is to take slightly longer to prepare information for collection. We only give information asked for, even if we are aware of other information that will be required.

We also note on the letter of professional clearance if a client has delayed paying or has an outstanding account, including a statement and invoice, this works surprisingly often! We did have one ex-client complain however we cited "professional etiquette and guidelines".  

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By Andy Reeves
26th Jun 2012 13:06

Don't return anything!

I had the same situation with a client last year, when they offered derisory monthly standing orders to clear a debt. I knew full well that, if I let them have everything back, they would not pay me so I just simply refused to return anything.

And you know what, I don't really care what ACCA or ICAEW say. I am a member of one of them, but they no longer really speak up for the interests of the smaller practitioner.

The new accountant doesn't seem that bothered and has never asked for them, but we did give them very comprehensive transfer papers, far in excess of what we were obliged to provide.

I am now still owed just over £1k of a £9k bill, and this will be cleared in a couple of months, so my approached worked.

This is part of an old AWeb posting from last year that refers to the same topic (and as I have made some marks on the records, I seem to be OK) https://www.accountingweb.co.uk/anyanswers/retaining-clients-records-if-my-invoice-unpaid/473533:

You are not allowed to put a lien on his paperwork unless you have done something to them. Even making ticks on bank statements is ok, but if you haven't even done that, you'll have to return them.

To quote David Winch from https://www.accountingweb.co.uk/anyanswers/releasing-clients-records :

The ICAEW guidance on liens is extensive. It is available online to ICAEW members who login to the ICAEW website. I have quoted a small part of it. Another small part says:

"There are two types of lien: general lien and particular lien. Case law has determined that accountants are only entitled to exercise a ‘particular lien’. Therefore in the context of this helpsheet ‘lien’ is referring to a particular lien which is the right of the accountant to hold onto the client’s property until the client pays the amount owed to the accountant for the work carried out in respect of that property." (emphasis added) (NB This means that if, say, you have completed the client's 2008 accounts, billed the fee, returned the 2008 records, not been paid but have now received the client's 2009 records you CANNOT exercise a lien over the 2009 records in relation to the outstanding fee for the 2008 accounts, because the outstanding fee is not related to the property over which you are seeking to exercise the lien.)

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