In short, yes, you can sue your accountant. When dealing with finance, mistakes by professionals could be costly to both individuals and businesses. The advice that accountants or tax advisors give is critical. There are heavy fines and penalties for those who do not comply with HMRC deadlines or make errors in the figure work. And remember, at the end of the day it’s you, the business owner, who is responsible and pays the financial penalty. What’s more,the losses involved in any accountant negligence claim can sometimes be significant.
However if your accountant has provided bad or negligent advice which has resulted in financial loss for you or your business, you may well have a strong claim for professional negligence.
Professional Negligence Solicitors deal with cases where an accountant has not acted in accordance with the standards set by their profession.
Looking for specialist legal advice on your Accountant Negligence Claim? Call our expert team on FREEPHONE 0800 1404544 for FREE initial phone advice – no strings attached
If you have suffered loss as a result of a negligent accountant or tax consultant, such claims are usually complex and take time to resolve. And you can guarantee that your accountants’ insurer will make sure they have an experienced professional negligence solicitor on their side. That’s why so important to get the right legal advice of your own – from solicitors with plenty of experience of professional negligence compensation claims and suing accountants.
How can you identify genuine professional negligence specialists?
Well, a good start is making sure that they are members of the Professional Negligence Lawyers Association. The PNLA is the only national body of specialist professional negligence solicitors. Needless to say here at Bonallack & Bishop, we are PNLA members , as well as being members of the specialist Commercial Litigation Association.
Suing your negligent accountant – for claims below £10,000
Negligence claims under the value of £10,000 (with the exception of personal injury and medical negligence claims) are dealt with by the Small Claims Court. Unfortunately, proceedings in the Small Claims Court do not allow you to have your legal costs paid by the other losing side, even if your case is successful.
As a result, it is highly unlikely to make financial sense to appoint a solicitor for a claim worth less than £10,000 – as your solicitor fees may very well be higher than any compensation you could win.
Common Types of Accounting Negligence
You should be able to rely on your accountant to provide advice which minimises your tax liabilities and ensures the smooth and profitable running of your company. However this does not always happen.
Some of the most common examples of Accountant Negligence in the UK involve the following;
- failure to conduct a proper audit
- failing to detect fraud
- incorrect share valuations
- negligent tax advice
- making data entry errors
- failing to correctly categorize income and expenses
- failure to submit tax returns on time
With the value of these kind of errors often being substantial, negligent advice from your accountant could be catastrophic for your business.
Equally, there is much at stake for the accountant if a professional negligence claim is made against them. That means that many accountants and their insurers fight any negligence claim all the way. And that means that you’re going to need a solicitor with plenty of experience of these kind of negligence claims on your side.
Click here to discover more about running a professional negligence claim.
Can I Sue My Accountant For Negligence? How to Prove Your Accountant Negligence Claim
1. You need to show that your accountant owed what is known as “”a duty of care” to you. Normally the accountant/client relationship is enough establish this, especially if you have a written contract with your accountant.
2. You must prove that the accountant has breached that duty of care. In simpler words, the accountant must have behaved in a way that a qualified accountant should not have done – that their behaviour was not what anyone would expect from a reasonable accountant
3. You must establish that you suffered either a substantial financial loss, or an anticipated loss
4. You need evidence to show that your loss came about as a direct result of the accountant’s professional negligence
A good and extremely common example of poor service from an accountant that won’t be sufficient to justify a professional negligence claim, is delay. Being too slow in producing accounts, for example, may be inconvenient and cause you business difficulties, but unless you actually suffer some form of direct financial loss, you won’t be able to claim compensation. However, that kind of poor service may well justify a complaint – either to the accountant or to one of their supervisory bodies (For details of how to complain about your accountant, see below).
A real example of accountant negligence
Let’s look at the particularly large scale example of Ernst & Young, one of the ‘big four’ accounting firms who, in 2005 were sued £700 million by Equitable Life, a former audit client, after the insurance company almost collapsed. This accountant negligence claim was in fact dropped but would have bankrupted the accountant’s UK division if it had succeeded. Small wonder that the profession is so well regulated!
What is audit negligence?
An audit should be an objective and comprehensive examination of a company’s finances resulting in an auditor’s report. Whilst it is, of course, the company retaining the auditor, increasingly the opinion of any auditor is being relied on by people outside the business. However, sometimes auditors make negligent mistakes – and when this happens, the company, or any 3rd party relying on that audit, there can be a huge price to pay.
Professional negligence claims against auditors are often brought either by the company concerned alternatively, by any third-party to whom auditors have vouched the accuracy of the audit – such as the purchasers of an audited business.
Anyone considering making a professional negligence claim against a negligent auditor will need specialist legal advice. Our professional negligence team can help – by initially assessing whether any claim is likely to succeed, and if so, establishing your case for compensation.
Perhaps the two most commonly found subjects of auditor negligence are:
- Negligent failure to identify employee fraud during an audit
- Negligent audits of a company’s accounts
Negligent Tax Advice Claims
Like it or not, we all have to pay tax, and many individuals and businesses quite properly take tax advice from specialist accountants or other financial advisers with a view to minimising how much tax actually have to pay.
And those advisers have a duty to provide us with the right advice. If they don’t, and you lose out, you could be entitled to claim compensation.
Can I Make a Tax Advice Claim?
When it comes to negligent tax advice, there are a wide variety of grounds for making a claim but some of the more common include advice given in respect of;
- Tax avoidance schemes
- Income and corporation tax
- Capital gains tax
- Stamp duty
- Inheritance tax
The claim can cover a variety of financial losses including over payment of tax, interest and late payment penalties, which can prove substantial.
Who Do I Make my Tax Advice Claim Against?
Usually the claim is against whoever provided you with the advice directly – often an accountant or other financial adviser.
But claims can also be made, on occasions, against a number of others including those who manage, promote or introduce you to illegal or failed tax avoidance schemes, for example.
I Received Negligent Advice about a Tax Avoidance Scheme – Can I Still Claim?
In principle yes, subject to the paragraph below about proving your negligence claim.
Recently the government has started to crackdown much harder on tax avoidance schemes – and it looks like this will only continue. As a result the number of claims in relation to these schemes has increased significantly – and is likely to continue doing so in the next few years.
The size of the compensation bill In respect of the schemes is likely to be huge, following the £13.6bn for PPI compensation and £1.05bn arising from the interest rate hedging products scandal.
What may be particularly frightening for many people is that following a ruling in September 2015, British courts have confirmed that HMRC can now claim back dated tax on avoidance schemes that were originally entered into legitimately and before new legislation outlawing such schemes was introduced
Among the more common reasons for making a successful claim for negligent advice about a tax scheme are the following;
- Your adviser failed to provide enough information or advice
- Your adviser recommended a scheme that simply didn’t suit your particular financial and personal circumstances
- Your adviser recommended a scheme that was simply flawed
- Your adviser recommended an illegal scheme, or one in breach of the financial regulations.
Getting the Wrong Tax Advice – Proving My Negligence Claim
Having to pay high levels of tax in the first place is bad enough, but many people find it quite intolerable when they suffer a big loss because of the wrong tax advice from a trusted adviser in the first place.
And any subsequent investigation by HMRC only makes matters worse.
In broad terms, to make a successful professional negligence claim in relation to tax advice, you will need to prove the following;
- That your adviser was acting for you and had a duty of care to you in respect of the advice which was given, or which should have been given to you
- That your adviser was negligent i.e. they didn’t take sufficient care when advising you in the first place about your payment of tax. This normally means that it was the kind of advice that a reasonably competent tax advisor or accountant would not have given.
- That you relied on that advice i.e. you have to prove that you took direct action as a result of the advice you received.
- That as a result of acting on that advice, you suffered a financial loss such as an unnecessarily high tax bill, interest or penalties imposed by HMRC.
- That you can’t recover any loss – e.g. that you can’t recover any over payment of tax from HMRC
- What’s more, if your adviser claimed to be a tax specialist, that will certainly help you claim.
How Can I Fund My Negligent Tax Advice Claim?
There are a number of ways to potentially pay for your claim – including no-win no fee [or conditional fee agreements as they are also known] and fixed fees, which are often used for the initial assessment of your claim.
Our professional negligence team can explain your funding options to you.
However we strongly advise, where appropriate, the use of mediation to resolve your claim – and rest assured we will do our utmost to settle your claim without the need for the inevitably high legal costs involved in an expensive contested court application.
Suing Your Accountant for Negligence – Working As Part of a Team
Getting the right specialist tax adviser on board is one of the most important parts of your claim.
If your existing accountant has the right tax specialism, we are more than happy to work with them. However many accountants don’t have the degree of expertise required. In that case we can help you find the right tax expert to support your claim – we have established a close working relationship with the specialist professional negligence team at leading accountants BDO.
Accounting Negligence – How We Can Help
If you believe that the tax advice you received was negligent, and you suffered a financial loss as a result of at least £25,000, then don’t delay, get in touch with our team without delay.
- Provide FREE initial advice on the phone on FREEPHONE 0800 1404544
- Provide, where possible, an initial view on whether or not you might have a successful claim
- Investigate your claim further with a view to giving you more substantial advice on your chances of success. This will involve looking at the advice you are given, the terms of the retainer with your adviser, the way the advice was given to you and any supporting written or other materials that encouraged you to take the action that caused you a financial loss
- Explain your options if you decide to make a claim
Suing your accountant – paying your legal bills
When it comes to funding your case, there are a number of potential options for you, which our solicitors can discuss with you.
But dependent on the strength of your claim and the value of the sums you have lost, we will discuss with you the possibility of running your case on a no win no basis – which, in broad terms, means you need not worry about paying your legal costs.
Click here to read more about how no win no fee could help you in suing your negligent accountant.
Settling your professional negligence claim
Rest assured that our team will do their utmost to get the right result for you. However, that doesn’t mean rushing to court.
If at all possible, we will try to settle your claim sensibly without the need for a court hearing. Why? Going to court is expensive, slow and can be highly stressful.
We strongly support the use of what are called methods of “alternative dispute resolution”. The most well-known of these is mediation – and the head of our dispute resolution team is a qualified civil mediator himself. So you can be guaranteed that our team really understand how mediation works and how to get the best out of it.
However while we will do all we can to avoid your case having to go to court, if that’s simply not possible, you can rely on our team to fight your corner before the judge.
Suing your accountant for negligence – don’t delay
Most professional negligence claims, including claims made against negligent accountant sor tax advisers, have strict time limits. In general terms you have just six years to start your claim. And the six years normally runs from the actual date of the mistake – or if you weren’t aware of an error at the time, six years from the date when you became aware of the negligent act.
The event, it always sensible to contact a solicitor at the earliest possible stage – while events are clear in your mind and before any potential evidence is lost.
Please note, however, that there is an absolute 15 year limit from the date of the negligence beyond which you are unable to make a claim regardless of when you became aware of the negligence. This is sometimes referred to as a ‘longstop’ time limit. In short it means that if you discover that your accountant was negligent 15 years ago or more, then regardless of how strong your claim is, or when you discover the negligent act, you are prevented from bringing any claim against them
So our advice is simple – don’t delay, take action today and get in touch with us for FREE initial advice on FREEPHONE 0800 1404544.
Complaining about poor service or misconduct
Here at Bonallack & Bishop, we are able to help you with your accountant negligence claim – but as you will have seen above, that requires that you have suffered some actual financial loss. We cannot help you with any other complaint.
However, if, despite poor service or misconduct, you haven’t actually suffered financially, what are your options?
You can complain about your accountant. They have a variety of different qualifications. So depending on the qualifications of your particular accountant you may need to address your complaint to the appropriate regulatory body.
Most qualified accountants will fall under one of three professional bodies:
- Certified accountants are monitored by the Association of Certified Chartered Accountants (ACCA)
- Chartered accountants are regulated by the Institute of Chartered Accountants (ICAEW)
- Management accountants are supervised by the Chartered Institute of Management Accountants (CIMA)
Each of these have well controlled and structured complaints procedures. According to these regulating bodies, members are required to observe proper standards of professional conduct and refrain from ‘misconduct’ defined as any act likely to bring discredit on themselves, the regulating body or the accountancy profession.
These regulators have the power to impose a wide range of penalties for poor behaviour or client care– the most serious of which is being struck off as an accountant.