Lien

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Dean
Dean Registered Posts: 646 Epic contributor 🐘
Nice little ethics question to chew over.

We have a Particular Lien exercised on a client's records. The client now has an inspection from Customs and wants to look at the records.

I've checked the PRPG 2006 for reference but in essence it's saying to seek specialist legal advice.

Naturally we don't want to carry out any futher work and we don't want to be too 'helpful' as there's about 3k outstanding and it's highly likely we're not going to see this.

Anyone been in this situation?

Regards

Dean

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  • A-Vic
    A-Vic Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
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    Dean wrote: »
    Nice little ethics question to chew over.

    We have a Particular Lien exercised on a client's records. The client now has an inspection from Customs and wants to look at the records.

    I've checked the PRPG 2006 for reference but in essence it's saying to seek specialist legal advice.

    Naturally we don't want to carry out any futher work and we don't want to be too 'helpful' as there's about 3k outstanding and it's highly likely we're not going to see this.

    Anyone been in this situation?

    Regards

    Dean

    Hi Dean

    Just lightly covered lien last week when i covered unit 32 and i was a little confused over the who has "legal ownership" of paperwork in the case of outstanding debts.

    In your case i cant see HMRC paying to release the paperwork, however i cant see them forming legal action to you to do so!!!!
  • claudialowe
    claudialowe Registered Posts: 275 Dedicated contributor 🦉
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    Hi Dean

    Are they a sole trader or Ltd Co?

    As I understand the rules, you can have a lien over a s/t records, but not a Ltd Co - as they form part of the "company" records - same as mem and arts.

    Have you tried the MIP team?

    Claudia
  • Dean
    Dean Registered Posts: 646 Epic contributor 🐘
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    Hi Dean

    Are they a sole trader or Ltd Co?

    As I understand the rules, you can have a lien over a s/t records, but not a Ltd Co - as they form part of the "company" records - same as mem and arts.

    Have you tried the MIP team?

    Claudia

    Hi Claudia

    A lien is a legal right to retain possession of property until a financial claim that the holder of the property has against its owner has been met.

    I don't think there is a difference if it's a ST or LTD.

    No, I haven't tried the MiP helpline as we're fairly sure the outcome will be that the records are to remain in our possession and Customs can visit the office to review them. We will point out a Lien is in place and therefore we won't be prepared to assist in anyway.

    I have a feeling that we could outright refuse to let them visit the office because of the Lien but that will only wind them up and they will come back with a Statutory demand to gain access.

    Regards

    Dean
  • claudialowe
    claudialowe Registered Posts: 275 Dedicated contributor 🦉
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    I am sure that I have read (on AWeb?) that there is a difference between s/t and ltd co. Their search engine is particularly useless, and I cannot find it, nor even remember when it was.

    If I have any more bright ideas, or can find a link for you I will let you know.

    Claudia
  • claudialowe
    claudialowe Registered Posts: 275 Dedicated contributor 🦉
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    http://www4.icaew.co.uk/index.cfm/route/143804/icaew_ga/pdf

    This may, or may not, help you!!!

    Claudia
  • Poodle
    Poodle Registered Posts: 711 Epic contributor 🐘
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    I know that when a company goes into liquidation the Lien does not apply then,
    here

    I have had experience of this one.

    I tried to go after the director as per my letter of engagement but in the end wrote the fees off.

    Not sure what powers the VATman has for this, perhaps he could just come to your office and sit there, without the client, and inspect the records?

    Poodle
  • Poodle
    Poodle Registered Posts: 711 Epic contributor 🐘
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    Hi Dean

    Went back to the VAT act 1994 to find this

    Here

    You need to look at Schedule 11 section 7

    Poodle
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    The link to the ICAEW handbook provided by Claudia explains the situation very well.

    - You can exercise a lien provided the fees arose on work completed specifically in relation to those documents.

    - A request by HMRC to see records does not prejudice the lien.

    - Sole-traders and companies are treated differently and a lien cannot be held over a company's statutory books and records or their accounting records. However, for this purpose, accounting records would include sage data, for example, but not necessarily the underlying receipts and invoices.

    As HMRC have opened an enquiry the situation becomes a little more sensitive so I would recommend seeking legal advice on the legitimacy of your lien.
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    Poodle wrote: »
    I tried to go after the director as per my letter of engagement but in the end wrote the fees off.

    Poodle, I also have such an indemnity clause in my letters of engagement but was advised by my former employer, who included a similar clause in their engagement letters, that they would not be enforceable in law.

    Is this why you wrote off the loss?
  • Dean
    Dean Registered Posts: 646 Epic contributor 🐘
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    Claudia, many thanks for that link! I've got that handbook too, can't believe I didn't look there!!

    Interesting point about the company records! While it's fair enough not to be able to exercise Lien over the Statutory records, it's suprising about the accounting records. Having said that, I guess it would only be current accounting records. Once the final accounts have been prepared the, then, underlying records are not deemed 'accounting records'. That's how I interpreted the handbook anyway?

    Save to say, our Lien has been exercised over company records. We have prepared the 2006! accounts, so presumably, we are within our right to retain possession of the source documents but not the final accounts (showing the financial position)?

    Regards

    Dean
  • Poodle
    Poodle Registered Posts: 711 Epic contributor 🐘
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    I also have such an indemnity clause in my letters of engagement but was advised by my former employer, who included a similar clause in their engagement letters, that they would not be enforceable in law.

    Is this why you wrote off the loss?

    Only one of the reasons.

    I went down the usual route of writing, calling, leaving messages and visiting but the debt was only £500 and so when I got to the point of possible court action I did balance up the possibility that the clause would not be effective along with the cost, loss of time, effort in worrying about it, against the high probability of non recovery, even with a CCJ and decided to learn the hard lesson and move on.

    I am now much more cautious with Ltd companies and I use the Barclays credit manager that emails me alerts on any changes to the credit rating of the limited companies on my books.

    I do try to get as many clients as possible onto a monthly payment plan as I know you do as well but not all of them want that. In my positon I would not allow a debt to get as high as £3,000.

    Poodle
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