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Understanding Liability for Accountant Mistakes and Poor Advice



Who is liable for accountant mistakes?

As a limited company director, you are responsible for filing the correct information with HMRC even if you employ the services of an accountant to help you with this task. If you submit incorrect information to HMRC – even if this is due to a mistake by your accountant – your company will be held liable for any fees or charges which occur as a result.

Who is responsible if an accountant makes a mistake on your company accounts?

“My accountant has been negligent and has made mistakes on my accounts, are they liable for this and who is going to be held responsible for the extra money I owe HMRC?” 

When you hire an accountant to handle certain financial aspects of your business, you are trusting them to accurately file your accounts with HMRC. However, in rare cases an accountant will give you the wrong information or file incorrect accounts and, as a result, cause you to miss a payment due date or incur penalties and fees. Almost every business owner or director who encounters such a mishap understandably would like to point all liability towards the accountant who made the mistake in the first place, after all, they have been paying the accountant to ensure the company's account are correctly managed. 

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Despite you employing an accountant to take care of your company's accounting obligations, HMRC will maintain that it is the director of the company who is legally responsible for ensuring the accuracy of a company's information when submitting tax returns or other statutory filings to HMRC. Therefore, the company itself is held liable for any taxes, fees, or interest incurred due to the mistake of their appointed accountant. If you fail to pay these additional costs HMRC could eventually move to wind up your company and put it out of business.

Simply put, as the director of the company, you are ultimately responsible for what is filed with HMRC, not your accountant. If your accountant gives you poor advice or files the wrong accounts, they will not be held liable for this by HMRC.

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What to do if your accountant has given you bad advice or made a mistake?

The fastest and easiest way to rectify the problem would be to contact HMRC immediately and notify them of the situation. They may be able to grant you an extended deadline or work out a special payment plan (known as a Time to Pay) if you don't have the funds to pay everything that is owed in one lump sum. You may also want to consider hiring a new accountant to give you a second opinion and conduct a thorough audit of your accounts.

The answer to this question will depend on several factors, including:

  • Whether the accountant has admitted to making the mistake - If they have then you have all the proof you need to file a claim against them in Court and demand compensation for any additional fees or interest you incurred due to their admitted mistake.

  • Have you already paid HMRC all that you owe them in taxes? - If you have not paid HMRC the extra amount that you owe (in fees/interest) then chances are that the Court will not honour your claim because technically you have not yet lost the funds that you are trying to sue your accountant for.

  • Does your accountant have professional indemnity insurance? - If your accountant does not have insurance you could still sue them but the chances of collecting compensation are much lower.

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In conclusion, if your accountant makes a mistake on your accounts and as a result you owe additional money to HMRC it is possible to be compensated, but if the accountant does not have professional indemnity insurance or is unwilling to file a claim against their insurance to cover the cost then you would first have to pay HMRC what you owe them (or arrange an extension or payment plan) and then take the accountant to Court to obtain a judgment against them.

If you've recently become aware of the fact that your accountant has made mistakes on your accounts you should seek professional guidance as soon as possible to avoid being stuck with the consequences of an accountant's mistake. Call our team today for free and confidential help.

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