Professional Negligence: Negligent Tax Advice Claims

Our tax team is comprised of highly experienced solicitors and barristers with decades of experience in litigation and managing disputes and appeals with HMRC at all levels. Our experienced lawyers regularly carry out work in many tax disputes areas, from advising clients on whether HMRC have followed the correct procedures to successfully challenging HMRC’s policies. 

Unlike many other tax firms, members of our team are experienced litigators with professional negligence experience and in particular when it comes to claims for negligent tax advice. Given our tax law expertise, we are well placed to spot when you have been given bad tax planning advice (by a negligent tax adviser or accountant) or when a tax lawyer has conducted your case without the due care and skill expected of a legal professional specialising in tax disputes.

Have you been given bad advice by a tax adviser?

Tax advisers will give tax planning advice. If you have received negligent advice to enter into a tax avoidance scheme and have received a Follower Notice or Accelerated Payment Notice from HMRC then you may have a claim for compensation for the financial loss that you have suffered.

If HMRC have or are contemplating enforcement action against you as a taxpayer, and if you HMRC’s enforcement has been caused by negligent advice given by a tax adviser, then you may have a claim for your losses.

Investing money into financial products carries risks and a tax adviser must ensure that the risks are adequately explained to a client before entering into the investment. It is also paramount to ensure said tax schemes are legal.

If you have been given bad advice or have a complaint about a financial adviser it is important that you take independent legal advice to seek compensation for your loss before the time limits expire (usually six years). We work closely with our specialist professional negligence lawyers who can be instructed to provide advice on the merits of any claim.

How do I start a professional negligence claim against my tax adviser?

In order to commence a professional negligence claim before a Court in England & Wales you must issue a County Court or High Court claim form accompanied with Particulars of Claim setting out the details of the claim including the remedy sought from the errant immigration solicitor or barrister. The issuance of the Claim Form must be done within strict time limits known as limitation periods and the relevant court fee must be paid (which is a percentage of the losses claimed up to a maximum of £10,000).

For a step-by-step guide on how to start a professional negligence claim for compensation click here.

What is the time limit for commencing a claim against a tax adviser or accountant?

Time limits and limitation periods are essential to adhere to in litigation. Missing a limitation period is fatal to the chances of success of any claim and will leave a claim statute-barred.

When it comes to ascertaining the limitation date for a particular claim, there are a number of factors to consider. In simple terms, the limitation period is six years from the accrual of the cause of action (section 2, Limitation Act 1980). However, if the six year time limit has passed but you have only just discovered the effect of any latent damage, then the limitation period may be extended to three years from the date of knowledge (section 14A, Limitation Act 1980).

If you have a complaint against a tax adviser, then our advice is that you take independent legal advice as soon as possible.

What is the basis for a professional negligence claim against an accountant or tax adviser?

negligence claim for negligent tax advice must satisfy three basic requirements on the balance of probabilities otherwise it will fail:

(1) a duty of care must be owed by the professional (tax adviser or accountant or financial adviser); (2) the professional must have breached this duty; and (3) the breach of that duty must cause a loss.

If you have suffered a loss regardless of the immigration adviser’s negligence or if the real cause of your loss was due to an extraneous factor outside of the responsibility of the professional then a claim could be reduced or extinguished.

Common examples of negligence by tax advisers

A tax adviser, tax planner, financial adviser or accountant could be negligent for a variety of reasons, it is important to seek professional advice at the outset from our specialist team who can assess whether you have a claim for compensation:

  • failure to recommend a tax planning or financial scheme suitable for your needs;
  • recommendation of a scheme that is flawed or illegal;
  • overcharging of fees;
  • failure to follow your instructions;
  • recommendation of a scheme which is too risky and one which you would not have entered if you have been appraised properly on the risks in advance;
  • poor financial planning advise provided to you as an individual or as a director of a company;
  • mistakes when preparing accounts for you or your company;
  • inadequate business advice;
  • undervaluation of companies in relation to disputes or on the disposal of shares;
  • incorrect advice regarding tax reliefs and exemptions;
  • failure to advise a client that a tax avoidance scheme had a significant risk of failing.

Have you been recommended a tax avoidance scheme by a tax adviser or accountant?

A tax avoidance scheme is used to minimise tax exposure. HMRC defines tax avoidance as: 

“bending the rules of the tax system to gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little to no purpose other than to produce this advantage, it involves operating within the letter, but not the spirit, of the law.”

HMRC on Tax Avoidance

If you are part of such a scheme, or suspect you are part of a tax avoidance scheme, seek advise from our expert tax lawyers as soon as possible. Following this assessment our specialist professional negligence lawyers can advise you on whether you have a claim against the adviser that recommended such a scheme.

How do I know whether I am part of a tax avoidance scheme?

The following warning signs demonstrate that you might be part of tax avoidance scheme:

  • Paying in the form of loans: some schemes designed for contractors involve payments in the form of loan that you are not expected to pay back.
  • Substantial benefits: if the benefits of the scheme seem disproportionate to the money being generated.
  • Money goes round in circles: a sign of an artificial relationship is where the money goes around in a circle back to where it started- or some other artificial arrangement.
  • HMRC has given it a scheme reference number: An SRN is where HMRC have identified the arrangement as having the hallmarks of tax avoidance and are investigating it. Having an SRN does not mean that HMRC have approved the scheme (HMRC does not approve any tax avoidance schemes).
  • Schemes HMRC have concerns about: click here for examples of tax avoidance schemes HMRC is looking closely at.

Do I have a claim against my tax adviser if HMRC have take enforcement action against me?

If you are implicated in a tax avoidance scheme it is imperative that you seek legal advice as soon as possible. Our professional negligence lawyers work in tandem with our specialist tax solicitors and barristers and provide a dual strategy in both advising you on your dispute with HMRC and advising you on whether a claim can be made against your the adviser who recommended that you enter into the scheme in the first place.

How do I prove that my tax adviser has been negligent?

In order to sue a professional for negligence, a claimant must establish three elements to the civil standard of proof (on a balance of probabilities, i.e. it must be proved by the claimant that the financial adviser’s breach of duty caused the claimant to suffer loss).

1.Demonstrate that the tax adviser owed you a duty of care: the boundary lines between when a tortious duty of care is owed or not owed is subject to tests that are being continuously evolved by the courts. A duty of care exists where the tax adviser can be shown to have objectively assumed responsibility (and the courts have demonstrated increasing willingness to find that a tax adviser is liable to whomever reasonably relies on their advice).

2. Establish that the tax adviser has breached the duty of care owed to you: proving breach will obviously vary depending on the individual circumstances of the case. A claimant needs to demonstrate that the breach shows that the tax adviser fell below the standards of a reasonably competent adviser in that speciality.

3. Prove that the tax adviser’s breach caused loss to you: you must prove both factual and legal causation. The test for factual causation is that “but for” the tax adviser’s breach you would not have suffered loss. Legal causation must also be proved i.e. the loss must be reasonably foreseeable at the time when the relevant duty was breached.

Examples of tax avoidance schemes

If you have been advised to enter into a tax avoidance scheme and you are concerned that HMRC will take enforcement action or if you have received a Follower Notice or Accelerated Payment Notice from HMRC, then take legal advice as soon as possible to assess whether you have claim against your financial adviser for negligence.

  • Pension Schemes:

– Artificial Surplus: Certain pension schemes create an artificial surplus enabling a member of a registered pension scheme to remove funds from the pension scheme tax free.

– Employer Financed Retirement Benefits Scheme (EFRBS): this pensions scheme creates the establishment of an offshore trust where an employer transfers funds and trustees apply funds via sub-trusts to the benefit of the employees.

  • Employee Benefit Trusts (EBT): EBTs enable a trustee to own an asset on behalf of a beneficiary which has the effect of minimising liability to pay National Insurance contributions and Income Tax. The point of an EBT is that employers pay into the trust which would then be distributed to employees in the form of tax free loans. Previously, those in EBT schemes could utilise the Liechtenstein Disclosure Facility which allowed taxpayers to disclose hidden assets to HMRC. However, this voluntary disclosure facility has been closed for new registrations since December 2015. Instead, HMRC recommends using the EBT settlement opportunity. EBTs are increasingly common complaints against financial advisers, if you believe that you are part of an EBT, get in touch with our expert tax and professional negligence lawyers for confidential advice.
  • Stamp Duty Avoidance Schemes: examples include property sale arrangements that have been artificially structured to avoid paying the correct amount of SDLT. HMRC repeatedly challenge these schemes as it is a priority of the Commissioners to collect the correct amount of SDLT. For example, HMRC successfully challenged a Stamp Duty Land Tax (SDLT) avoidance scheme in the First Tier Tax Tribunal in Vardy Properties and Vardy Properties (Teesside) Limited [2012] UKFTT 564 (TC). If you have suffered loss as a result of a SDLT scheme then you may have a claim against the financial adviser that sold you the scheme.
  • Share Loss Relief Schemes: share loss relief schemes reduce the amount of tax payable on earnings by creating capital losses.
  • Inheritance Tax Schemes (IHT): IHTS are utilised primarily to avoid inheritance tax. Some schemes exist to allow the homeowner to sell a property to a trust and leave the proceeds of the sale outstanding as a loan which would then be gifted to a second trust.

Book an Initial Consultation with our Professional Negligence Lawyers

Do you have a claim against a professional? If you want expert legal advice, do not delay in instructing us so we can assess the legal merit of your case.

We can often take on such claims on a no win no fee basis (such as a Conditional Fee Arrangement) once we have discussed the claim with you and then assessed and advised you on the merits of the proposed professional negligence action.

Our expert legal team of leading Professional Negligence Solicitors & Barristers can provide urgent help, advice or representation to you. Just call our Professional Negligence Lawyers on 02071830529 or email us now.

Instruct Specialist Professional Negligence Solicitors

We are a specialist City of London law firm made up of Solicitors & Barristers operating from the only law firm based in the Middle Temple Inn of Court adjacent to the Royal Courts of Justice. Our team have expertise in advising on claims for compensation against professionals that have fallen below the standard expected, which causes clients financial or personal loss. We are experienced in bringing successful claims against negligent solicitors, barristers, financial advisers, insurance brokers, surveyors, valuers, architects, tax advisers and IFAs.

LEGAL CASE ASSESSMENT

Just fill out our simple enquiry form; it goes immediately to our litigation team in Middle Temple, London. You can also call our lawyers on +442071830529 from 9am-6pm.

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