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Professional Clearance

Professional Clearance

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Client owes us money and have left us to join another accountant and other accountant is chasing paperwork from us. What shall we do? we have already taken CCJ against Client? are we allowed to hold on to information until the Client settles the balance?

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By johngroganjga
06th Aug 2015 10:12

Your question is headed "professional clearance" but is actually about providing copy documents and information to a successor. They are two different things.

No you can't withhold professional clearance because you have unpaid fees. You should provide it without delay.

Yes you can, generally speaking, withhold documents and information until you have been paid.

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Euan's picture
By Euan MacLennan
06th Aug 2015 10:32

Yes, but ...

I agree with John, although I am slightly surprised that he did not make the point that you are not actually granting professional clearance, but advising the potential new accountant of circumstances of which he should be aware before deciding to accept the appointment.  Yes - you must respond to the professional request.  I would suggest something on the lines of:

We confirm that there are no professional circumstances of which you should be aware before deciding to accept appointment, but we will not provide the information you have requested until our outstanding fees, for which we have obtained a CCJ against the client, have been settled.

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By johngroganjga
06th Aug 2015 12:38

I was using professional clearance with its usual meaning in professional shorthand.

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06th Aug 2015 12:51

But you cannot withhold client property ...

... even if you've not been paid, unless you have a clear and specific term in your engagement letter or T's & C's.

Client property is much more extensive than you might think. Almost all of your accounts prep file will be client property, as will tax returns and the like.

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By johngroganjga
06th Aug 2015 13:38

It doesn't need to be in the engagement letter or T&C. It's a common law right available to all creditors when certain conditions are satisfied.

Yes the devil can be in the detail. That is why I said "generally speaking". But that's academic at this stage. Let the detail be examined if and when the debtor or the new accountant take issue, which is most unlikely any time soon.

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06th Aug 2015 13:57

Then we'll agree ...

... to disagree!! Doesn't stop you trying though, and it usually has the desired effect without resorting to the technicalities of the law.

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By stepurhan
06th Aug 2015 14:42

Or not

MBK wrote:

... to disagree!! Doesn't stop you trying though, and it usually has the desired effect without resorting to the technicalities of the law.

See the ICAEW guidance on the legal principle of exercising a lien.

So an accountant is legally entitled to retain the client's records under UK law until their fee is paid. The exception (as mentioned in the linked information) is when those are company records. The Companies Act requirement that the directors have access to those records at all times over-rides the ability to exercise a lien.

Also, as taxguru said, not all the information is the client's property. If the work hasn't been paid for, then the client doesn't have an automatic right to the content of working papers.

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By taxguru
06th Aug 2015 14:19

My view on this is that any

My view on this is that (subject to any specific engagement terms) any non-audit relationship (e.g. compiling accounts, filing tax returns etc) is in the nature of a principal-agent relationship and as a consequence the documents created are the property of the principal. For reference here is an old case  Leicestershire County Council v Michael Faraday & Partners Limited [1941] 2 KB 205.

However, it's a different case altogether if it's about being an auditor or about providing advisory services.


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Time for change
By Time for change
06th Aug 2015 14:26

Management of your fee income

might also be worth considering, given this experience?


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Jennifer Adams
By Jennifer Adams
09th Aug 2015 09:30

I had similar problem recently..

and I checked the situation out with my Prof indemnity insurance company.

The solicitor there confirmed John's comment that you have the right to retain the clients papers (bank statements, receipts etc) until payment is received as per a normal creditor.

I was advised that you cant withhold copies of returns and accounts etc that will enable the new accountant to do his job.

Solicitor suggested that I just respond to the request by giving that info only and make no mention of outstanding fees.

I have had experience of this from the other side. I took on a client and rang the 'old accountant' supposedly just to confirm the correct person to send to the letter to and at the same time I asked re fees. He said he 'was paid eventually' but nothing was given in writing.



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