I advised a client that, due to his refusal to pay my fees, I was going to exercise a lien over his (sole trade) records. I had been paid on a couple of invoices, but not the third one (£500+VAT). However, more than two years later, the records are still here and cluttering up valuable storage space. I have no intention of returning them if I am not going to be paid, and I think he may have moved away in any case. The last exchange of correspondence involved him threatening to take my firm to Trading Standards, and me replying to tell him I was happy with everything that I had done, and pointing him to my engagement letters!
The quality of the records was pretty dire, and his tax returns were already overdue when I took him on, but I am prepared to give most prospective clients one chance to reform so I took him on. By the time we parted company, he was under HMRC enquiry, and I am pretty sure that he would have not have dealt with them on his own (and there has been no professional clearance request from a new accountant) so the enquiry is probably still open. There is no current 64-8 on file to allow me to check.
So, what can I do with the records now? My preference would be to write to his last known address(es) by recorded delivery to advise that, unless he collects the papers and settles the fees, I intend to have everything sent away for secure destruction after 28 days.
Replies (15)
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I don't see the problem. Either: -
(1) Return the records and sue for the remaining debt.
(2) Keep them and let them gather dust as they are doing now.
Having cake and eating it
The problem you have is that you have exercised right of lien. Insisting on keeping the records, and then complaining about having to keep them seem in conflict.
That said, if you are more than two years later then you are past the point that HMRC requires records to be kept. If you were still within that period then I would be wary about destroying them under any circumstances. As it stands, I see nothing wrong with your idea of sending a letter giving 28 days notice. Provided you have informed them of the intention to destroy the records and given them reasonable time to forestall that action you should be covered.
Sorry to hijack .....
The problem you have is that you have exercised right of lien. Insisting on keeping the records, and then complaining about having to keep them seem in conflict.
That said, if you are more than two years later then you are past the point that HMRC requires records to be kept. If you were still within that period then I would be wary about destroying them under any circumstances. As it stands, I see nothing wrong with your idea of sending a letter giving 28 days notice. Provided you have informed them of the intention to destroy the records and given them reasonable time to forestall that action you should be covered.
..... I thought that a sole trader was required to keep their records for 6 years (or 5 years from the deadline from submission, or whatever the technical phrase is) ?
HMRC Extract
The problem you have is that you have exercised right of lien. Insisting on keeping the records, and then complaining about having to keep them seem in conflict.
That said, if you are more than two years later then you are past the point that HMRC requires records to be kept. If you were still within that period then I would be wary about destroying them under any circumstances. As it stands, I see nothing wrong with your idea of sending a letter giving 28 days notice. Provided you have informed them of the intention to destroy the records and given them reasonable time to forestall that action you should be covered.
..... I thought that a sole trader was required to keep their records for 6 years (or 5 years from the deadline from submission, or whatever the technical phrase is) ?
You must normally keep your business records for another five years after the online tax return deadline of 31 January, in case HMRC decides to check your return. The same date applies even if you've sent in a paper tax return.
An example
The tax return deadline for an online 2012-13 return is 31 January 2014.
You send your tax return in before this deadline.
You need to keep your records until 31 January 2019, five years later.
But if HMRC send you, or you send back your tax return very late, you may need to keep your records for longer. You need to keep them until the later of:
five years after the 31 January tax return deadlinefifteen months after the date you sent your tax returnIf HMRC has started a check
You may need to keep your records for longer if HMRC has started a check into your tax return. In this case you'll need to keep your records until HMRC writes and tells you they've finished the check.
Inconsistent HMRC
The page I was looking at earlier only showed 1 year. I thought that was a bit odd, but presumed there had been a change I didn't know about. a sole trader was required to keep their records for 6 years (or 5 years from the deadline from submission, or whatever the technical phrase is) ?
http://www.hmrc.gov.uk/sa/record-keeping.htm#3
The 5 to 6 years is more in keeping with my recollection, and is indeed shown on another HMRC page.
http://www.hmrc.gov.uk/sa/rec-keep-self-emp.htm#5
Of course, HMRC will claim that the individuals on the first page is clearly not referring to sole traders. I suspect that most sole traders seeing this page are likely not to realise that. Indeed, just skimming the page (though I admit the specifics are in the opening paragraph now I have read more carefully) I clearly didn't spot the distinction myself.
Also, is that correct? If you do not have a self-employment, do you really only need to keep records for a year after the deadline.
Just a thought
If he has moved away, your letter sent by recorded delivery will be returned in a month's time marked as "gone away" and you will be no further forward.
If you are still appointed as his agent, just try checking SA Online to see if it is showing a new address.
Otherwise, do you have his mobile number or e-mail address? Better to contact him that way than fail to contact him in writing.
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If he has moved away, your letter sent by recorded delivery will be returned in a month's time marked as "gone away" and you will be no further forward.
If you are still appointed as his agent, just try checking SA Online to see if it is showing a new address.
Otherwise, do you have his mobile number or e-mail address? Better to contact him that way than fail to contact him in writing.
Following on from Euan, I am assuming that as he is a sole trader, he will need to advertise his trade somewhere to gain clients and you could get his contact information from that.
What is the point of having cake if you can't eat it?
If anyone has cake and doesn't want to eat it, I can PM you my address ;-)
Add storage fees. (Then you can write off a much larger amount when you accept that he's not going to pay you).
Actually some harm
I appreciate you want the best result out of this (being paid and getting your money) but you have shot yourself in the foot here. Our engagement letters (based on ACCA templates), simply state that we will destroy documents which are more than seven years old (unless of continuing significance - which they would not be, to us), so they are not of much help in this case.
If the agreed terms say you will destroy records after seven years, destroying them earlier would seem to be contrary to those agreed terms. You might argue that they have already breached the terms by not paying you, invalidating the contract, but you are open to a counter-claim because of this term.
As I said before, you only have the records because you exercised lien. Presumably the records would already be back with the client if you had not. I do understand why you did it and I sympathise with your position. That doesn't change the fact that you are only in a position to destroy the records because you elected to retain them. If the client had abandoned them, that would be a different matter. With the exercise of the right, I feel you have also given yourself the responsibility of not destroying them needlessly. Seeking to do so just because they are now inconvenient to you is not likely to be a good defence if it ever comes to a court dispute.
Scan ?
My only suggestion would be to scan them & then destroy the paper. Depends on the volume of paper, I suppose.
Sorry to be gloomy
I'd really like to be able to say that you could set the records on fire and throw them through his front window (verifying the address was correct first of course). Sadly, whilst not what you would prefer to hear, more gloomy advice that could save you grief in a dispute seemed more appropriate.