Accountant Negligence Claims Solicitors
Negligent tax advice, audit failures, incorrect financial statements, and advisory errors by accountants can expose clients to significant HMRC penalties and financial loss. The accountant's professional indemnity insurer is liable for that loss.
Accountants — whether chartered accountants, certified public accountants, or tax advisers — owe their clients a duty of care to exercise the skill and care of a reasonably competent accountant. Where an accountant's advice or services fall below that standard and the client suffers financial loss as a direct result, a professional negligence claim lies against the accountant — and in practice against their professional indemnity insurer. Common accountant negligence claims arise from negligent tax planning advice, failure to advise on tax reliefs, audit failures, incorrect preparation of company accounts, and negligent business valuation advice. A solicitor will assess the merits, instruct a forensic accountant as expert, and pursue the claim.
Accountant Negligence — Common Types of Claim
Accountant negligence — the most common types of claim and the financial losses typically recoverable from the accountant's professional indemnity insurer.
Accountants provide advice and services on which individuals and businesses rely — often to their financial detriment when that advice is wrong. A solicitor specialising in professional negligence claims will identify whether the accountant's failure gives rise to a viable claim and pursue it for the full measure of the client's loss.
Negligent tax advice — incorrect returns, missed reliefs, and HMRC penalties
An accountant advising on tax is under a duty to advise correctly on the applicable tax treatment of transactions and to identify tax reliefs and allowances to which the client is entitled. Where the accountant gives incorrect advice — miscategorising income, overlooking a relief, or advising on a tax structure that does not achieve the tax efficiency it was designed to provide — the client suffers loss in the form of excess tax paid, penalties, and interest charged by HMRC. A professional negligence claim against the accountant seeks to recover the tax, penalties, and interest that would not have arisen but for the negligent advice. The measure of loss is the difference between the tax actually paid (including penalties and interest) and the tax that would have been payable if the correct advice had been given.
Failure to advise on tax reliefs and planning opportunities
An accountant is under a duty not only to answer the questions put to them but to advise proactively on tax planning opportunities that are available to the client — including reliefs the client may not know about. Where an accountant fails to advise a client on: Entrepreneurs' Relief (Business Asset Disposal Relief); Research and Development tax credits; Business Property Relief or Agricultural Property Relief for inheritance tax; EIS or SEIS investment reliefs; or other significant reliefs available on a specific transaction — and the client incurs a higher tax liability as a result — the client can recover the tax savings forgone as a result of the accountant's failure. The claim requires expert evidence from an independent tax expert as to what a competent accountant would have advised.
Audit failures — negligent statutory and non-statutory audits
An auditor owes a duty of care to the company whose accounts they audit. Where an auditor fails to detect material misstatements, fraud, or financial irregularities that a competent auditor would have identified, and the company or its shareholders suffer financial loss as a result, a professional negligence claim lies against the audit firm. Auditor negligence claims are complex — they typically involve large volumes of accounting records and require expert evidence from a specialist forensic accountant. A solicitor will manage the claim, instruct the expert, and pursue the audit firm's professional indemnity insurer for the full measure of the loss suffered as a result of the audit failure.
Incorrect company accounts — misleading financial statements
Where an accountant prepares company accounts that incorrectly state the financial position of the company — overstating assets, understating liabilities, or misstating profit — and a third party relies on those accounts to their detriment (a lender provides credit on the strength of the accounts; an investor makes an acquisition based on them), a professional negligence claim may lie against the accountant. The claim is brought on the basis that the accountant owed a duty of care to the person who relied on the accounts — established where the accountant knew the accounts would be used for the specific purpose for which they were used. A solicitor will advise on whether the duty of care to the specific claimant was established and manage the claim.
Negligent business valuation — over or undervaluing a business or its assets
Where an accountant provides a business valuation — for the purpose of a share purchase, a divorce settlement, an inheritance tax return, a shareholder dispute, or a business disposal — and the valuation is significantly incorrect (outside the range of values that a competent valuer could reasonably have arrived at), the client suffers loss if they rely on the valuation. A buyer who pays too much for a business on the strength of an inflated valuation; a seller who accepts too little on the strength of an undervaluation; or an estate that overpays inheritance tax on an overvalued business asset — each has a claim against the accountant for the financial loss flowing from the negligent valuation. A solicitor will instruct an independent valuation expert and pursue the claim.
Negligent insolvency advice — wrongful trading and directors' duties
An accountant or insolvency practitioner advising a company in financial difficulty owes a duty to advise correctly on the options available (administration, voluntary arrangement, liquidation), the consequences of continued trading (wrongful trading liability under the Insolvency Act 1986), and the duties of the directors in the run-up to insolvency. Where the accountant fails to advise on wrongful trading risk and the directors continue to trade, the directors may be held personally liable for the additional debts incurred — a loss they can recover from the accountant who failed to advise them of the risk. A solicitor will advise on whether the accountant's failure to advise constituted actionable negligence and manage the professional negligence claim.