What do you do when your accountant makes a mistake?

January 8, 2021

At around this time of year, every year, we start to hear from people who are in a bit of a hole because they or their accountants have made serious errors of judgement.

Perhaps you’ve noticed inaccuracies on a tax return that was completed by your accountant, or you’ve realised all too late that you’ve been getting the wrong advice.

Either way, many people have been left scrambling to fix those mistakes, with only weeks to go before the 31 January deadline for self-assessment tax returns.

If your accountant makes a mistake, who’s liable?

Unfortunately, even if you’ve placed your trust in your accountant to take care of your tax affairs, the liability for any mistakes still falls to you.

Your accountant acts as your ‘agent’ in HMRC’s terms, which means they’re acting on your behalf, but it’s your responsibility to make sure you’re compliant with tax rules and regulations – and if there are any penalties, you’re the one who has to pay them.

This can put you in a very difficult position when you realise things haven’t been dealt with as they should be.

Speak with your accountant

It sounds obvious, but your first step should always be to clarify things as best you can with your accountant. There could be a perfectly good explanation for a figure that doesn’t look right, or an easy way to amend it, so don’t panic if you see something you’re concerned about.

A good accountant will be able to explain the issue and answer any questions clearly and promptly.

If this is not the case, and you don’t feel the issue has been resolved, your next step should be to make a formal complaint in writing.

Most firms are required to have an internal complaints procedure in place as part of their code of conduct, and will have a duty to address the problem.

Notify HMRC

If you know that an error has been made, contact HMRC as soon as possible.

HMRC tends to be more lenient towards people who come forward about mistakes first, rather than waiting for the mistake to be discovered – or, even worse, trying to cover it up.

This will be taken into consideration when determining penalties, so being honest and upfront as soon as you know there’s a problem is the best way to reduce any potential fines.

They can also work with you to resolve the problem. You could get an extension to a deadline if the error has left you with little time to prepare your return, for example, or you might be able to arrange a payment plan if you owe additional tax.

Taking further action

If you feel your accountant’s service has fallen short of what you expected, you might choose to raise a complaint with their professional body.

If they’ve failed to provide an adequate service and you’ve suffered a financial loss as a result – and if your other formal complaints have been ignored – you may be able to make a claim for professional negligence.

Members of bodies like the Institute of Chartered Accountants in England and Wales (ICAEW) or the Association of Chartered Certified Accountants (ACCA) are required to have professional indemnity insurance, which covers the cost of compensation for mistakes.

While you can make a claim whether or not they’re insured, this means you’re more likely to receive any compensation a court orders.

One thing to consider is whether your accountant has admitted to making a mistake, as you’ll be able to use this as proof in any court proceedings. You’ll also need to make sure you settle any penalties you owe to HMRC before taking action regarding them – if you haven’t paid them, you can’t claim them as a loss.

Going down the legal route can often be costly and complicated, so be sure to get professional advice before taking action.

Finding a new accountant

The best way to avoid the stress and financial cost of mistakes is to choose an accountant who has the professional expertise, skill and experience to carry out the job properly.

Contrary to popular belief, the title ‘accountant’ is not legally protected in the same way that jobs like ‘lawyer’ or ‘dentist’ are. In other words, anyone can call themselves an accountant, even if they don’t have the necessary technical training or qualifications.

One thing to look out for is their professional body membership. Accountants who are certified through organisations like the ICAEW or ACCA will have met a minimum level of accountancy training and agreed to work to a set of professional standards.

You can search the ICAEW’s list of chartered accountants here to find out whether someone has chartered status.

Another good place to look is the firm’s reviews, either on their website or through a neutral source like Google Reviews. Think about the qualities you’d value the most in an accountant, such as reliability, clear communication, professionalism and prompt responses, and look for reviews that talk about those attributes.

It’s also important to consider their sector specialisms, and whether they usually work with clients with similar needs to your own.

Finally, their personality shouldn’t be overlooked. Your initial conversations with an accountant should help you to judge how easy they are to work with, whether they take a genuine interest in you and your business, and whether their values match up to your own.

While it’s not everything, a strong personal connection can often be the basis for a working relationship that’s not only productive, but long-lasting too.

Get in touch today for accounting and business tax advice.

Ready to talk?

Dick Haffenden JCS

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Tell us about yourself, your goals and what you need to achieve them and one of our team of friendly accountants will be in touch to begin the conversation.

020 8643 1166

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