Retention of Clients' Accounts & Working Papers

Retention of Clients' Accounts & Working Papers

Didn't find your answer?

I've always assumed I should keep current & former client files of accounts & working papers for 6 years for tax purposes.  However, these aren't actually records, as such (all primary records are returned to the clients) - and so do they need to be kept as such? 

Working papers belong to the accountant, who has no obligation to share them, and in the event of a tax enquiry, assistance including their use is chargeable on the client.  Correct?

So do I need to retain them for former clients?  What about for a company that has been liquidated (as opposed to having been struck off)?

Advice will be gratefully received.

Replies (4)

Please login or register to join the discussion.

avatar
By zebaa
09th Mar 2011 21:37

And...?

...what do they advise? Pretty please. Lets try & give the OP some guidelines. My suggestion would be to scan all documents once you are done, then dispose of the paperwork. Keep back-ups. Space becomes not an issue and you can keep stuff for years and years if you feel the need.

Thanks (0)
avatar
By User deleted
09th Mar 2011 21:50

The ACCA says:

 

Hope this helps! Would agree with Zebaa about scanning & saving!!

A professional accountant shall use his/her own judgement in determining the period

for which working papers should be retained. The minimum periods for which a

professional accountant shall retain working papers are as follows:

Audit working papers 7 years

Files on clients’ or former clients’ 8 years (then return them to the

chargeable assets and gifts client or former client or obtain

authority from the client or former

client for their destruction)

Files of professional accountant as For the period of trusteeship and

trustee (other than trustee in 7 years thereafter

bankruptcy)

Investment business advice For the life of the policy and

3 years thereafter

6. Tax files and other papers that are legally the property of the client or former client

shall be returned to the client (or former client) after 7 years or his/her specific

authority obtained for their destruction.

Thanks (0)
avatar
By Ken Howard
10th Mar 2011 10:30

What about protection against negligence claims?

The 6/7 year period for working papers for tax enquiry reasons is all well and good, but what about keeping papers to protect ourselves against negligence claims, which I understand can be brought against us upto 15 years after the alleged negligent advice (or lack of advice) occurred?  

I'm keeping "some" documents for at least 15 years now.  I had one particular family who were a right royal pain in the [***], not only with appalling record keeping, but also a bad attitude and always wanted to stretch exemptions and reliefs, making things up as they went along to justify what they wanted to do - trouble was they had a lot of money and were constantly starting up new companies, buying properties, etc., often ignoring my advice as regards ownership splits etc to the extent that some things they did were plainly stupid and against basic/generic tax planning which would be likely to leave them with huge tax bills in the future that could have been mitigated with a different mix of ownership and ltd co structure at the outset.  At the time, I made sure I always noted phone calls and tried my utmost to give written warnings by post or email.  After 6/7 years I've weeded their files, but I'm certainly not destroying it, nor am I relying on scans - I'm keeping tight hold of the original paperwork as prepared at the time (I've scanned it as well of course).  When the 15 years are up, I'll have to take a deep breath and destroy as I don't think I can justify keeping it all under the data protection laws, which is a shame - that' one case where I'd prefer to keep the paperwork for ever, just in case!  

I saw what happened with the endowment mis-selling fiasco where advisers were assumed not to have given proper advice if they couldn't prove otherwise, even though when the advice was originally given, there wasn't a requirement to keep the records for very long time periods.  I don't trust the authorities not to extend the negligence claim period for accountants,  the way the goalposts constantly change, often with backdated effect.

I think assuming the 6/7 year rule is appropriate is quite dangerous.  I tell clients the same.  I advocate they properly look through their records and weed out all the routine dross, like small/repetitive receipts and invoices, but to keep anything unusual, i.e. paperwork for purchase of property, improvements, equipment, employee files re disciplinary matters etc, supplier and customer files for any peculiar or unusual contracts, and any bank or credit card statements with anything unusual on them, and keep the supporting stubs, just in case.  It's amazing how you can turn a few boxes of paperwork into a single file just an inch or two thick, preserving what really matters.

It's not just for tax that you have to keep records, you need protection against future claims as well, and you never know when a claim may be made against you for whatever reason.

 

 

Thanks (0)
avatar
By girlofwight
12th Mar 2011 07:34

Everything, for ever
My approach is keep everything, for ever...

But scanned (and backed up from server) rather than paper.

Scanning everything is a slight cultural change - A4 paper only, no staples in the file - but once done and in a routine it's quick, simple and liberating.

Thanks (0)