Professional clearance requests: accountants behaving badly

Some accountants aren’t honouring professional clearance requests, leaving the next accountant unaware of illegal activity.

Professional clearance requests are usually sent to a client’s previous accountant in order for the new accountant to obtain accounting and tax documents and other relevant information relating to the client.

But crucially, it’s a safeguarding mechanism for accountants to find out if there is any particular reason why they should not take on the new client, such as tax evasion, fraud or unsettled accountant fees.

Ideally, the outgoing accountant will respond to the request for information promptly and honestly and the new accountant – once they decide to accept their new appointment – can proceed with the onboarding process.

In accordance with AAT’s Client Care policy which includes guidance on client disengagement and professional clearance requests, members must:

• Send a client disengagement letter, regardless if it is their choice or the client’s to end the engagement.
  • The letter should outline any outstanding work to be completed prior to conclusion of the engagement and any outstanding work that won’t be undertaken.
• Cooperate and correspond with any new accountant whom their outgoing client chooses to appoint.

In some circumstances, outgoing accountants may exercise the right of lien, as long as:

• The relevant documents belong to their outgoing client and not a third party.
• The accountant has acquired these documents as a result of their engagement with their client.
• An invoice has been raised in relation to work identified on the documents which has not been paid.
• The outgoing client was initially made aware of the accountant’s right of lien in the initial engagement letter created right at the start of the engagement and is also referenced in the accountant ‘document retention’ policy.
• The accountant has sought legal advice over right of lien.

However, professional clearance requests are frequently beset with issues, not due to client misdemeanours but due to some accountancy firms causing unnecessary delays, particularly if the outgoing accountant or accountancy firm is not licensed by a professional accountancy body such as AAT.

It is a policy across all professional accountancy bodies for their members to cooperate and comply with professional clearance requests, but unqualified and unlicensed accountants have no regulating body to enforce this.

We spoke to several accountants about the frustrations they’ve been experiencing with professional clearance requests and the steps they’re taking to try and overcome them.

I’ve had unprofessional firms withhold client documents for petty reasons

Sam Mitcham FMAAT, SJCM Accountancy

Issues I’ve experienced with professional clearance requests:

• The previous accountant doesn’t reply at all.
• Refusing to cooperate due to unpaid fees and/or withholding records.
• Responding with limited or incomplete information.
• Dragging their heels, despite a tax deadline coming up.

Sometimes, I’ve had to unpick a previous year’s accounts due to incomplete or incorrect information but this isn’t billable time because it was due to the previous accountant’s error.

Withholding client records in particular has a lot of legalities behind it and there’s a fine line between what belongs to the client and what belongs to the accountant. But often, documents belong to the client and withholding documents for petty reasons due to relationship breakdown is not acceptable.

I’ve had clients who have owed me money or who have spoken out of turn to colleagues, but when their new accountant writes to me for professional clearance, I’ve never withheld information or made life difficult for that accountant. It’s about upholding professional standards.

Accountants should respond to professional clearance requests in a timely manner and returning documents should be done as a matter of urgency, while ensuring the new accountant is sent everything they’ve requested.

For accountants experiencing issues with professional clearance requests, I’d advise:

• Attempt different methods of communication – telephone, letter or email.
• Contacting HMRC or Companies House to obtain information needed directly from them.
• Look at who the accountant is regulated by and follow their professional guidance and recommended action.
• As a last resort, consider legal action.

Verdict: Some firms have withheld client information for petty reasons – but that’s never acceptable. It’s about upholding professional standards.

We’ve had to report an accountant to their professional body

Zahid Mustafa, Co-founder and director, Erdingsworth Business and Tax Advisors

We face delays and problems with professional clearance requests quite often. Sometimes the former accountant may provide incomplete information or there are errors such as wrong or incomplete disclosures in the accounts.

Some firms of accountants seem very uncooperative in efficiently transferring the client to us. On occasions, it appears that they just want to ‘wash their hands’ of the client. We also tend to see small clients (ie, those that do not warrant a big fee) being treated unfairly and not being advised properly. We then have to pick up the pieces and tidy up the former accountant’s mess, which can take years.

Accountants who do not behave in a professional and timely manner once they receive a professional clearance requests can be reported to their institute by the new accountant or the client. We have successfully reported one such accountant to a professional accountancy body in the past, for example.

Verdict: We’ve had to report one accountant to their professional accountancy body because they refused to cooperate with professional clearance requests.

Would you like to contribute to future articles like this one? If so, please get in touch with Annie Makoff-Clark at [email protected]. Upcoming topics include tackling poor client behaviour, AML difficulties and whether digital-only the answer to HMRC’s VAT problems.

Annie Makoff is a freelance journalist and editor.