Common Accountant Negligence Claims
The Bolam Standard Applied to Accountants
An accountant's duty is to exercise the reasonable care and skill of a competent member of their profession in the relevant field — whether tax, audit, financial reporting, or business advisory. The Bolam test (Bolam v Friern Hospital Management Committee [1957]) applies: if the accountant's conduct would have been accepted as proper by a competent body of accountancy professionals in the relevant area, the claim fails. Where the conduct was contrary to standards published by the ICAEW, ACCA, FRC (Financial Reporting Council), or HMRC guidance, it is strong evidence of breach.
- ICAEW Technical Guidance — for ICAEW members, Technical Releases and Practice Notes set out expected standards in audit, accounts preparation, and tax. Departure from published Technical Guidance is strong evidence of breach.
- HMRC guidance and legislation — where a tax return was prepared contrary to clear HMRC guidance or tax legislation, and no reasonable body of tax advisers would have taken the same approach, breach is established. Expert evidence from an independent chartered tax adviser or Senior HMRC official is often obtained.
- International Standards on Auditing (ISAs) — for audit claims, departure from the relevant ISA is strong evidence of breach. ISA 315 (identifying risks), ISA 330 (responses to assessed risks), and ISA 240 (fraud) are most frequently in issue in audit negligence claims.
Frequently Asked Questions
The accountant says they relied on information I gave them — is that a defence?
Partially — where an accountant relies on information provided by the client, and the information was incorrect without the accountant's knowledge, contributory negligence by the client may reduce damages. However, a competent accountant is expected to ask appropriate questions, seek clarification of inconsistent or implausible information, and perform basic checks. Where the accountant failed to make reasonable enquiries, they cannot fully shelter behind incorrect information the client provided. The extent to which the accountant's duty included verifying the information is key — a specialist solicitor analyses this at the outset.
Can I also complain to the ICAEW or ACCA?
Yes — the ICAEW and ACCA both have disciplinary procedures for members who fail to meet professional standards. A disciplinary complaint and a civil negligence claim can proceed in parallel. The disciplinary process does not result in compensation, but a finding of breach of professional standards in the disciplinary process can be helpful evidence in a civil claim. A solicitor advises on whether pursuing the disciplinary route alongside the civil claim is appropriate in your specific case.
Can I claim for losses caused by a tax scheme the accountant recommended that HMRC later challenged?
Possibly — where an accountant recommended a tax avoidance scheme without advising adequately on the risk of HMRC challenge, Accelerated Payment Notices, or Follower Notices, and those risks materialised, the accountant may be liable for the penalties, interest, and professional costs of defending the HMRC challenge. The key question is whether the accountant's advice on the risk level of the scheme was reasonable at the time it was given. A specialist solicitor and independent tax expert assess whether the advice met the standard of a reasonably competent tax adviser.
What professional indemnity insurance are accountants required to hold?
ICAEW and ACCA members in public practice are required to hold minimum levels of professional indemnity insurance — the ICAEW requires a minimum of the greater of £100,000 or 2.5 times the gross fee income of the firm. For larger firms, the minimum cover is higher. This means claims against ICAEW and ACCA members in public practice are typically made against their PI insurer, making recovery more reliable than for unregulated advisers. Unregulated tax advisers (who are not ICAEW or ACCA members) may not have PI insurance, and a solicitor advises on enforcement options in those cases.
The accountant's fee was small — but the HMRC penalties are large. Can I recover the full amount?
Yes — where the negligent advice caused HMRC penalties and interest that significantly exceed the accountant's fee, the full amount of the penalties and interest is recoverable as the foreseeable consequential loss of the breach of duty. The fact that the accountant's fee was modest does not cap the loss recoverable — the test is what loss was the foreseeable consequence of the negligent advice, not the value of the advice given.