Accountants are used by both individuals, sole traders and businesses for a wide range of services including book-keeping, preparation of accounts as well as providing regulatory advice and services. Accountants are relied upon to give competent tax advice that complies with taxation law. The term "accountant" is not regulated, and so anyone can call themselves this. As a result, the standard of service offered is very varied. There is always the risk that the services provided by an accountant will be incorrect. This usually occurs where the advice given by the accountant is wrong, or there is an accountancy error.
Where the service provided was below the accepted professional standard and leads to the individual or firm that they were advising suffering a financial loss, it is possible to bring a negligence claim against that accountant. It can also lead to criminal charges being brought against the accountant, so there are severe consequences. If you want to discuss any of the issues raised here, please contact one of our team today. We will put you in touch with one of our specialists who will offer plain language English advice, with a focus on delivering for you.
What Is Professional Negligence?
There is a range of accountancy errors that can occur and be regarded as professional negligence. In order to bring a claim for professional negligence, the client has to show that the accountant has breached the implied duty of reasonable care and skill and because of this breach they have suffered loss. The court will consider whether the accountant’s conduct was up to the required level of care and skill of an equivalently qualified accountant in the same circumstances. It is not enough for the client to show that they were not happy with the result that was achieved.
Accountants advising their clients on tax efficiency and tax avoidance is permissible. However, tax evasion is illegal, in particular where it involves money laundering or fraud. Accountants must ensure that their advice does not cross this boundary. There are other types of accountancy errors that could result in a professional negligence claim including:
- Failing to advise a client about a change in tax laws.
- Failing to warn a client about any risks relating to a tax mitigation scheme.
- Failing to correctly file a client's accounts or failing to meet the relevant deadlines.
- Failing to identify or report fraud as part of a company audit.
- Failing to inform a client of VAT obligations, or the need to register for VAT.
- Failing to value the goodwill of a business correctly.
- Failing to advise on the possible allowances and exemptions for tax mitigation purposes.
- Filing statutory accounts that are materially inaccurate.
These errors can result in substantial fines and penalties for the client from HMRC and so result in significant losses. It is in these circumstances that a client will want to seek compensation.
What Should You Do If Your Accountant Is Negligent?
The first option for someone that has been given negligent advice by their accountant is to use either the accountancy firm’s only complaints service or the professional bodies for accountants’ complaints system. A large number of accountants are regulated by the:
- Association of Certified Chartered Accountants (ACCA)
- Institute of Chartered Accountants in England and Wales (ICAEW)
These professional bodies aim to ensure that its members maintain the correct levels of professional service and conduct. If a client feels that their accountant's service is below the professional standard, they can raise a complaint with one of these bodies. This is an entirely separate procedure from the one used by the courts and does not need to be pursued before a client uses the court process. Accountants that are members of these bodies have professional indemnity insurance that will pay for any compensation that is ordered. However, if an accountant is not insured, then they may not be able to pay any compensation even if the courts made such an order.
Before a client can bring a claim, they should consider whether the accountant has admitted fault (which can then be used as proof in court proceedings). They also need to have paid any penalties or fines to HMRC that resulted from the error. If these have not been paid, then they cannot be claimed since the client has not actually suffered from that loss.
The parties must first try to resolve the matter outside of court following the procedure set out in the Professional Negligence Pre-Action Protocol. A large majority of cases will be resolved in this way. Where this is not possible, the client can then bring proceedings issuing a claim form which details their grievance and the losses suffered. At this stage, the accountant states if they are:
- Defending the claim
- Bringing a counterclaim, for example in relation to outstanding fees.
Are These Claims Time Limited?
The limitation period for claims for professional negligence is six years from the incident that gave rise to the claim or three years from the point that they became aware of the grounds giving rise to the claim. Claims that are not brought within this period may be forfeited and result in the client not being able to claim compensation. It is therefore vitally important that anyone concerned that they may have suffered a loss due to their accountant's negligence takes specialist legal advice as soon as possible to ensure that the correct steps are followed.
It is also possible to bring claims against accountants that are no longer in business, though again it is crucial to get expert legal advice on how to approach this situation.
What Funding Options Are Available?
There are various funding options available for clients that are needing to bring a professional negligence claim. In certain cases, it may be possible to have a no win no fee arrangement, which is known as a conditional fee arrangement.
Contact Our Professional Negligence Solicitors Mayfair and Throughout London Today
Clients that suffer after receiving negligent advice can find the whole situation very stressful. If they proceed with a claim without a proper understanding of the factual elements that are required to be established, they are at risk of covering the costs of losing the claim in court, including paying the defendant's costs.
At Lewis Nedas, our team of Professional Negligence Lawyers have award-winning experience in professional negligence cases. We have successfully advised clients with highly complex and multi-faceted cases. To speak with one of our Professional Negligence Lawyers, please contact us on 020 3811 5143 or complete our online enquiry form.
