My colleague wants to sue his former accountant for negligence/damages. The Revenue launched an enquiry into his Tax Returns and concluded that the Returns were "fundamentally incorrect due a lack of care in preparing them". They charged a penalty of £ 12000, interest of £ 14000, and a back tax bill of £ 61000. The accountant says its not his responsility and that he was simply acting on information provided by his client. My understanding is that accounants owe some form of duty of care to their clients and their work needs to be of a reasonable standard. The accountant also says that he will not communicate anymore unless the pre action protocol is followed which looks like alot of paperwork. It seems that there must be a case for a claim for damages/negligence for the penalty at least, if not the interest. The tax would have been due anyway.
Province/Country relating to question : United Kingdom
You are correct your colleague cannot sue in respect of the actual tax paid because that in lawfully due to the revenue in any event. However not only does the accountant have a duty in tort, i.e. there is a duty of care and he breached it but there is also a contractual duty. It is an implied term of the contract between your colleague and the accountannt that the accounts will be prepared with reasonable care and skill and he failed in that duty. As such the penalty and any costs directly flowing from the breach of contract and failure in tort are recoverable.
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Is the interest on the tax recoverable and do you think its necessary to follow through with the pre action protocol as the accountant is saying or can this be avoided. From the research we have done it seems that the Small Claims Court might look unfavourably on the claim if the protocol was not followed. And if he won could he recover costs eg a solicitor? Thanks. Paul
The interest should be recoverable since it would not have been payable had the accountant got it right in the first place. Your colleague should follow the pre action protocol as the court may take a dim view of him failing to and if he wins he is entitled to his legal costs. The costs granted in the small claims section of the County Court are minimal as the small claims procedure is meant to be used without lawyers
BA honours degree in law, over 20 years experience in litigation, contract and property matters
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