Professional Clearance Letters Explained

1. What professional clearance means

A professional clearance letter asks your previous accountant whether there are matters your new accountant should consider before accepting the work. The more precise term is a professional enquiry. Your new accountant decides whether to accept the appointment; your old firm does not have a veto. The letter often also requests the accounts, tax information and records needed for the handover.

2. Why accountants make the enquiry

Your new accountant needs to understand the work already done and any unresolved matters before taking responsibility for it. Professional enquiries form part of that decision, alongside the firm's own checks and the ethical rules that apply to it.

For you, the practical benefit is that filing deadlines, open tax questions and missing records can be identified before work changes hands. A reply to the enquiry and the transfer of records are separate steps, even when they are requested together.

3. What the letter asks for

A typical clearance letter includes:

• Your authority. Written permission for the firms to communicate about your affairs, subject to their confidentiality and legal duties.
• Request for professional clearance. The formal question: "Are there any professional reasons we should not accept this engagement?"
• Request for handover information. A list of documents and information required to take over.
• A requested response date. The letter identifies any approaching filing deadlines so the firms can agree the order of the handover work.

4. What information can be shared

With the necessary authority, the outgoing firm should respond promptly and provide relevant information honestly, subject to confidentiality and the law. The handover request will usually cover:

• Unresolved matters relevant to accepting the work, such as an error in a tax return that still needs correcting.
• The status of accounts, the Company Tax Return (CT600), VAT returns, payroll submissions and confirmation statements.
• Any outstanding matters with HMRC: open enquiries, disputes, unpaid liabilities.
• The last period closed and the reporting basis used.
• A copy of the latest accounts and tax computations.
• Working papers sufficient for the incoming firm to continue from where the outgoing one left off.

The new firm does not automatically receive the old firm's entire working file. Relevant information may still need to be supplied from documents the old firm owns. Anti-money-laundering restrictions also apply: an accountant must not disclose whether a suspicious activity report was made or share information that would amount to tipping off.

5. How long the handover takes

• You authorise the firms to communicate and confirm which work you want the new accountant to handle.
• The new firm sends the professional enquiry and requests the records needed to take over.
• The firms identify outstanding work and agree who will handle returns due during the change.
• Records, software access and the necessary HMRC authorisations are arranged. Some of these steps can happen together.

The time needed depends on the records, replies and authorisations involved. Ask for a handover date based on your next deadlines. Our handover checklist explains which records to gather.

6. What can delay the handover

If the handover stalls, ask which information or decision is outstanding:

• No reply. The new firm should chase and follow its professional body's procedure. ICAEW guidance includes a further written notice with proof of delivery and a reasonable response period. The new firm must still make the necessary checks before accepting the work.
• Outstanding fees. Ask which records are being retained and the basis for doing so. The rules are explained below.
• Unresolved work. An open HMRC enquiry or an error needing correction may require more information before responsibilities can be agreed.

7. Can unpaid fees hold up your records?

An accountant may sometimes retain particular documents until fees for work on them are paid. This is called a particular lien. Client ownership alone does not prevent it. ICAEW guidance identifies four conditions:

• The documents belong to the client who owes the fees.
• The accountant received them legitimately.
• Work has been done and an invoice issued.
• The unpaid fees relate to that work and the relevant period.

Companies and limited liability partnerships have additional protections for statutory and accounting records. Documents required for statutory inspection cannot be held under a lien, and withholding accounting information can prevent compliance with company law. An accountant should obtain legal or ethical advice before withholding company records.

Unpaid fees do not excuse failing to answer the professional enquiry. If you genuinely dispute a bill, set out the disputed work and amount so the firm can address it. A lien should not be used to force payment of a genuinely disputed fee.

We manage the clearance process for incoming clients. You provide the authority, we do the chasing. See how we handle the switch for the full sequence, or browse our switching guides for the background.