Chapter 11: PRPG Legal Matters associated with documents, electronic data and records Flashcards
11.1 Introduction
This chapter supplements the records requirements in 5.8 and HMRC and third-party access in chapter 7. It relates to all forms of documents and records whether produced by a member, client or third party. The principles discussed reflect the legal position in England and Wales, when foreign laws apply, a member should consider seeking assistance from a lawyer.
11.2 Retention of records and time limits for court action
A member should implement a policy for the retention of documents and records in their files, its best practice to include their policy in the engagement letter. When deciding the period of retention for records a member should consider:
• The data protection legislation stipulates that data must be held for as long as necessary
• The periods of retention required by law/statute. The Money Laundering, Terrorist Financing and Transfer of Funds Regulations in 2017 require the destruction of personal data five years after the end of a business relationship, unless otherwise agreed
• The period of time which actions may be brought in the courts and which records and working papers may need to be used as evidence. If documents are held for longer than a statutory period, they must have justification and not merely that someone might mount a challenge at some point
• The period of time documents may be required for compiling tax returns
• The period of time for which documents are needed to support a members work
A member should ensure working papers are secure to keep client confidentiality. All documents regardless of ownership, that concern a client and personal data are confidential. If a member outsources the deletion of records, it would be prudent to ask for a certificate as some time of evidence of deletion. Time limits for documents are set out below:
• Private company accounting records, retention period is three years from date they were made, under the Companies Act 2006
• Public company accounting records, retention period is six years from date they were made, under the Companies Act 2006
• Payroll records, retention period six years plus the current year, under the Taxes Management Act 1970
• Income tax records for an employee who has left, retention period is six years after employment ceases, under Taxes Management Act 1970
• VAT records, retention period is six years (10 if using VAT MOSS), under VAT Act 1994
• Tax records for a person carrying on a trade, profession or business alone or in a partnership or a company, retention period is five years from 31 Jan following the tax year the return relates to, under Taxes Management Act 1970
If not in the above, a member should keep the records for seven years from the end of the tax year or accounting period. Papers and records legally the property of the client should be returned or the client’s permission obtained for the destruction.
11.3 Requests from other third parties
If a third party sends a member a request for information, a member must obtain a clients permission or made sure the request is legally enforceable and overrides client confidentiality. This can be requests by HMRC although the engagement letter usually states that. Determining if a third party has a legally enforceable request or whether the request can be discussed with the client can be complex and a member should consider obtaining specialist advice. Where a third party seeks access to documents within a member’s possession under statutory powers, a member should before complying with the request, take steps to satisfy themselves that power is being exercised correctly. A member should remember such powers may not extend to documents subject to legal privilege, they should take specialist advice.
11.4 Lien
This is the right to retain possession of property until a financial claim that the holder of the property has against the owner has been met. Before exercising this a member should consider:
• Whether all steps have been taken to remove any sense of grievance
• Whether the potential loss of goodwill which may be caused by legal action, outweighs the financial considerations
• Whether to take specialist legal advice or recommend the client to take legal advice
A lien cannot exist over:
• the books or documents of a registered company that by statute have to be available for public inspection or to be kept at the registered office for certain periods
• the VAT records of any business
• under Insolvency Act 1986 prevent a person with a lien over books, documents or records of a company under liquidation or administration from enforcing it against a liquidator, administrator etc. A lien may be placed on documents prepared on behalf of a client. Ownership of documents is a complex legal area and a member should consult a qualified professional
11.5 drafting legal documents
Certain categories of legal documents may only be drafted by appropriate qualified legal persons. These reversed legal activities included drafting a document relating to the transfer of real property or personal property. A person convicted of such documents without appropriate qualifications is liable to imprisonment, a fine or both. If a member merely indicates required amendments to a legal document, but does not amend it themselves, they are not committing an offence.
11.6 Data protection including GDPR
A member must comply with GDPR, for example ensuring they:
• obtain document instructions from any data controller on whose behalf they process data
• maintain records of all processing activities
• are able to identify and document under what basis they are protecting data
• consider the reporting requirements if there is a breach
• ensure they have procedures in place to deal with individual rights which clients can exercise
• store data confidentially and securely and implement cyber security measures
• have appropriate security measures
• have appropriate consent, particularly for marketing purposes and allow consent to be withdrawn
• issue appropriate privacy notice to clients
