When your accountant makes mistakes, who is liable?
January is when most people leave their accountants. It’s because they realise their accountants have failed to complete their tax returns as soon as possible or haven’t notified them of a large, looming tax bill they have to pay in a few weeks. This can lead to penalties and scrutiny from HMRC with tax investigations lasting 16 months on average, costing roughly £5,000 in accountancy fees. You might fall into debt or even insolvency.
It’s the last thing you want for you or your staff. Your ability to put food on the table shouldn’t be based on something someone else does or doesn’t do. You can’t blame certain business owners for not wanting to gamble with their future like this.
More often than not, though, accountants complete your tax returns on time. But sometimes they can still make mistakes. When this happens, who is liable for the error and the resulting penalty charges from HMRC?
An agent of your business
Most of us would like to turn around and blame the accountant because, from your point of view, the error was their fault. But HMRC doesn’t always see it this way.
When you hire an accountant, they’re hired as an agent of your business. This means they carry out work on your company’s behalf. HMRC often shares this view. The accountant has made the error, but they’re an extension of your business, so your business remains liable for any fines or penalties occurring from the situation.
This may seem unfair. After all, the reason businesses hire accountants in the first place is that they often lack the knowledge and skill to do taxes efficiently and correctly.
What can you do if your accountant makes a mistake?
If you find yourself in a situation where your accountant has made a mistake, the best thing to do is notify HMRC as quickly as possible. They may allow you extra time to complete a correct tax return, extending your deadline and helping you avoid paying a penalty. HMRC are quick to deal with late-payers and companies who file inaccurate information. But time-to-pay negotiations are a lifeline if you’re struggling.
Can you take action against your accountant?
If the error is serious and has pushed your company to the brink of insolvency, you may be able to take your accountant to court if they admit their mistake. But if the accountant has no professional indemnity insurance, the chances of you receiving compensation are much lower. It’s worth noting you can only reclaim the extra fees paid to HMRC if you have already paid them. If an accountant has a history of poor practice, you could also make a complaint against them to their professional accountancy body.
This is why it’s so important to choose an accountant who used modern technology and has a history of excellent customer satisfaction. You don’t want to end up liable for their mistakes.
Find an accountant who shares your approach to business and life. Someone who you have chemistry with in a B2B situation. You need someone you can rely on to help you keep the lights on and keep your staff happy. Ultimately, you need someone who can help you thrive. Instead of waiting for a problem to arise, find the right accountants for you now.
Big Hand are experienced, reputable accountants who take the burden of filing your taxes off your shoulders so you can focus on your business. We save you time, stress, and money, so for more information, get in touch on 0161 327 2911.