Can I claim against my accountant for fees to HMRC?

Can I claim against my accountant for fees to HMRC?

I was recently fined by HM Revenue & Customs after my accountant prepared inaccurate tax returns. I have had to pay substantial additional tax as well as significant amounts to cover late payment interest and charges. Do I have a claim against my accountant and what would I need to do to bring one? Does it matter that the tax returns were filed many years ago, but HMRC has only alerted me to this issue now?

Headshot of Elliot Grosvenor-Taylor, associate at Kingsley Napley
Elliot Grosvenor-Taylor, associate at Kingsley Napley

Elliot Grosvenor-Taylor, associate in the professional negligence team
at law firm Kingsley Napley,
says you may well have a potential claim against the accountant for professional negligence or breach of contract. It is well-established that professionals owe their clients a duty of care. This is usually evidenced by the written retainer or engagement letter between the professional and the client. In the absence of a written retainer, it may be implied by the parties’ conduct. 

Depending on the extent of the inaccuracies in the tax returns (and the reasons for these), it sounds like your accountant could have breached their duty of care to you. The standard to be applied, when considering this, is whether the accountant, when acting for you, fell below the standards of a reasonably competent accountant.

For a claim to be successful it is necessary to prove that the accountant’s breach caused you losses. Depending on the reasons for paying the additional tax, this may be satisfied, however, you would not be able to claim for tax payments which would ordinarily have been paid had the accountant provided accurate returns, as this is not a loss. However, if the accountant’s inaccuracies led to the late payment interest and penalties, these losses would be potentially recoverable.

HMRC’s Compliance Handbook states: “A person cannot simply appoint an agent and deny responsibility for their tax affairs. The person still has a duty to take reasonable care, within their ability and competence, to make sure that what they are signing for is correct.” 

This is known as contributory negligence and the question asked is whether you have contributed towards your own loss. If so, this may reduce the amount of your claim, or extinguish your claim entirely. For example, did you give insufficient information to your accountant or did you fail to spot any errors that should have been picked up when reviewing your tax return? 

You have six years from the date of the negligence to bring a claim, but this may be extended if the negligence became apparent at a later date. In those circumstances you have three years from the date of knowledge of the facts which might give rise to a claim.

As HMRC has only alerted you to the issue now, even though the six-year timescale has passed, you are potentially within the three-year extended limitation period. However, be aware that professional negligence claims need to be resolved within 15 years of the negligent act.

Should I become a charity trustee?

I have been asked to become trustee of a charity and would like to do so because I have left it money in my will. However, I am concerned with how onerous obligations are for trustees of charities nowadays, particularly surrounding the governance of finances. What should I consider personally before accepting?

Headshot of Sarah Williams, partner at BDB Pitmans
Sarah Williams, partner at law firm BDB Pitmans

Sarah Williams, partner at law firm BDB Pitmans, says becoming a trustee can be incredibly rewarding. Before signing up, though, ask yourself what you know about the charity, what it does and how it operates. This will help you assess whether it is the right fit.

It’s a good idea to review the charity’s accounts and ask to see documents such as a risk register to understand any liabilities you may need to manage.

Trustees are ultimately responsible for the affairs of the charities they preside over. This involves ensuring the charity is solvent, well run and delivering on its charitable objectives for the public benefit. Trustees need to ensure that financial controls are in place to protect charitable money. You should be clear about, and comfortable with, the charity’s financial position.

Consider whether there any conflicts of interest. You mention you have left money to the charity in your will. That is not a bar to you being a trustee, but do you have any other interests that may conflict with your duty, as a trustee, to act only in the best interests of the charity? Trustees are expected to identify and manage any conflicts of interests arising in practice, and to declare them as necessary. 

Our next question

I have just had an offer accepted on a family home. Money is very tight as we are hugely stretching ourselves to secure our dream home. The conveyancer we have been recommended is unaffordable, so I’m exploring other options. I feel nervous about using a cheaper conveyancer. Are there financial risks involved?

What is the commitment? Charities benefit from having a diverse range of expertise on their boards to inform trustee decision making. Are you filling a particular skills gap? Trustees are expected to attend regular board meetings (how frequently, and when, do the trustees meet?), participate in decision-making, and contribute expertise to specific projects. If it is a charitable company, you will also be a director under company law and need to ensure the charity complies with company law requirements in addition to charity law.

If the charity is unincorporated, you should be aware that the trustees enter contracts in their own names and can (in some circumstances) be personally liable. In any event, ask whether trustee indemnity insurance is in place, which might offer some reassurance.  

Recognising the voluntary nature of the post, charity law generally acts to protect trustees who act honestly and reasonably, but trustees need to be aware that the Charity Commission is an active regulator with powers to intervene where necessary. The Charity Commission covers organisations in England and Wales, while the charity regulators in Scotland and Northern Ireland have their own guidance for trustees.

The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.

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