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Hi Steve, I am another tax expert here. Would you like me to help you in the absence of the expert the question was addressed to?
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Dear Tax expert
Yes I would like you to help me with the answer.
Steve, thank you for your reply...
My answer is based on scenario if I were the accountant and my client was considering a claim against me for negligence ..
I will look at the letter of engagement to ascertain what my responsibilities are in this engagement.. was advising on VAT matters as part of the terms of engagement?
If yes, did I give proper advise expected of me as a professional. Do I have notes to support the basis of my advise.
I would contest the claim if I am fairly convinced that:
The advice was outside my terms of engagement or
If within, I had given proper advise and I can support it from my notes etc.
For your friend, in order to succeed, he would have to prove that:
He had asked for advice and was not given proper advice or expected it as it was covered in the letter of engagement.
It would be a lengthy and costly process. The incident happened in 2007 and he is within his time limit to lodge a claim.
The accountant would most probably have professional indemnity insurance to cover claims for negligence.
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To tax advisor
Thank you for your answer. I still have a few queries however. What is the time limit for making a claim if 2007 is still within the period? How many years would need to lapse before any possible claim could not be made?
As far a I am aware, no letter of engagement was ever signed. Could a claim still be made?
In the event of a claim, would it be the insurance in place at the time of the incident or the insurance company in place at the date the claim is received that would be liable? An accountant may be insured with a different insurance company now than the insurance that was in place at the time the mistake was made.
Steve, thank you for your reply.
The limitation Act 1980 sets out limits within which action may be taken for breaches of law.
As an example, breaches of an ordinary contract are actionable for six years after the event. I am not a lawyer and you may wish to dicuss the legal position of a contract between a client and his accountant in the absence of a formal letter of engagement between them.
The current insurance policy should cover claims made in the period of cover. Some insurance policies may cover claims relating to previous period provided there was continuous cover and no previous claims within specified number of years.
If you have a valid claim, then it is the problem of the accountant whether he has protection or not.
Steve, thank you for accepting my answer.
Your bonus payment is greatly appreciated.