Examples of accountant negligence

The following are all examples of negligence by accountants which have resulted in successful claims at trial. It is however, important to understand that each matter and allegation will always turn on it's own facts and that pursuing any civil claim to trial is highly risky.

• Failing to file tax returns or incorrectly calculating tax liabilities - missing the deadline for filing a tax return or miscalculates the tax owed, resulting in penalties, interest charges, or investigations by HMRC. These types of claims can be among the more straightforward on liability but proving loss can be more complex.

• Negligent tax structuring advice - where the accountant advises a client to structure their business in a tax-efficient way but fails to consider legal tax obligations or tax relief eligibility, leading to an unexpected tax liability or penalties for tax avoidance.

• Failing to detect fraud or irregularities in financial statements - where an accountant is responsible for preparing financial statements but fails to identify fraudulent transactions or errors, leading to legal and financial consequences for the client.

• Negligent business valuation - where the accountant provides a business valuation that is significantly inaccurate, causing the client to overpay for an acquisition or sell at a loss. This can be a difficult type of claim because business valuation methods can vary significantly.

• Accountant advice on on Inheritance Tax (IHT) planning - in this scenario, it will be the beneficiaries who may sue the accountant for negligence for failing to suggest tax-saving measures or incorrect IHT related advice.

• Payroll and/or PAYE related negligence - many small and medium sized businesses outsource payroll. If this is incorrectly managed, leading to underpayment or overpayment of staff, or incorrect PAYE tax deductions, resulting in penalties from HMRC, it can constitute professional negligence.

• Failing to advise on Insolvency risks - for example, where an accountant fails to warn a business owner that their company is trading while insolvent, leading to wrongful trading claims and/or personal liability for directors. A claimant in this type of claim may face considerable legal hurdles relating to causation i.e proving that the failure to advise caused the loss rather than the business owner's own actions.

• Misrepresenting financial information to investors or lenders - for example where an accountant prepares financial reports for a business seeking investment or finance that overstate profitability, leading investors or lenders to make decisions based on misleading information. In this scenario, the accountant will owe no legal duty of care to the investors or lenders but they may contractually sue the investee or borrower who in turn may sue the accountant for negligence.

• Poor pension or investment advice - for example where an accountant advises a client to invest in an unregulated pension scheme without properly assessing the risks, resulting in substantial financial losses.

If you have suffered losses as a result of a situation similar to the above or any other type of potential accounting negligence which has led to you sustaining significant financial losses, please do get in contact.