Understanding Liability for Accountant Mistakes and Poor Advice

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

If your accountant has been negligent and has made mistakes on your accounts, you may be wondering whether they are liable for this and whether HMRC will view this as a valid reason for any errors made. 

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. 

Directors are liable for accountant mistakes

Unfortunately, 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 repayment 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.

Can I take further action against my accountant for mistakes?

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

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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 and this has led to you falling into debt with HMRC, you should seek professional guidance as soon as possible. If you cannot pay the money you owe, you may have to consider entering into formal insolvency proceedings. Call our team today for free and confidential help on your options when faced with limited company insolvency.