Member of BTG Global Advisory

Hiring an accountant to complete your company accounts and tax returns not only frees up time, it negates the need to employ high-level finance staff in-house. Most of the time this arrangement will work well, but sometimes errors are inadvertently made that result in financial penalties being imposed on your company by HMRC.

So what happens if your accountant makes a mistake with your books or tax liabilities? What recourse do you have to gain compensation in these cases, and how do you move forward on a firmer footing if your accountant is found to have been negligent in their work?

Final responsibility and liability for the accuracy and timeliness of tax returns and other document filing rests with your company. Part of your duties in taking on the role of director is to ensure the company’s compliance with all statutory requirements, and although the accountant may clearly be at fault in your eyes, it is the director’s signature as an officer of that company which completes the process prior to submission.

An ‘agent’ of the business

An independent accountant is hired as an agent of a business, meaning that they carry out work on the company’s behalf. HMRC takes the view that, although the accountant has made the error, it is the company that is liable for any fines or penalties arising from the situation.

The problem experienced by many directors is lack of knowledge about financial procedures, which is often why an accountant is hired in the first place. It may seem unfair, therefore, to place liability at the door of directors – even more so when heavy fines and penalties are issued by HMRC if returns are inaccurate or late.

What issues might arise to cause an incorrect submission to HMRC?

Some of the issues are mentioned below. It is worth remembering that you could mitigate the risks of error by providing the requested information quickly, thus allowing your accountant to file the returns well in advance of deadlines.

Some businesses submit their financial paperwork with days to spare before a tax return is due. This not only puts great pressure on an accountant to avoid late submission penalties, it can easily lead to errors and subsequent fines for inaccurate submissions.

What can you do to minimise this risk in the future?

If your accountant has been blatantly unprofessional or has little practical experience of dealing with limited company accounts, you may choose to look for a replacement. You could also make a complaint against them via their professional accountancy body.

Going down this route would mean that a newly-appointed accountant could scrutinise previous years’ accounts for further errors, and bring your financial obligations as a company back into line. This is assuming that the original accountant has not simply made an uncharacteristic error.

Time to Pay arrangements and HMRC

HMRC are quick to deal with late payers and companies that submit inaccurate information. Monetary penalties are imposed swiftly, adding to a company’s financial burden at a time when the cash flow outlook may not be positive.

In cases such as this you can enter negotiations with HMRC, taking responsibility for the error, but also explaining that it was your agent who made the mistake and requesting more time to pay.

Time to Pay arrangements are generally offered to those companies temporarily unable to pay their tax liabilities, and can provide the extra time needed to recover from a poor cash situation.

Can you sue your accountant?

If the error is a serious one and has affected your company’s ability to pay other suppliers, you may be able to take your accountant to court if they have admitted their mistake.

If the accountant has no professional indemnity insurance, the chances of you receiving compensation are reduced, however, and it is worth remembering that to reclaim the extra fees and interest charged by HMRC you need to have already paid them.

Begbies Traynor can advise on your legal position should your accountant have made errors with your accounts. We are the UK’s market leader for corporate recovery and have licensed Insolvency Practitioners across the UK.

Contact our team

Processing...
Latest News
York taxi company placed into administration
York taxi company placed into administration
On 25th November 2016, Rob Sadler and Dave Broadbent of Begbies Traynor in York were appointed as joint administrators of Six Five Nine Cars Ltd. The business, which has traded in York for over 15 yea…
40 jobs saved as gaming retailer sold out of administration
40 jobs saved as gaming retailer sold out of administration
Administrators of a South West-based gaming retailer have succeeded in saving 40 jobs at the company after securing the sale of the business, including 12 out of 15 of its High Street stores. Business…
Nearly 100 jobs saved as bars and restaurants are sold out of administration
Nearly 100 jobs saved as bars and restaurants are sold out of administration
Almost 100 jobs have been saved by the successful sale out of administration of a number of Midlands bars and restaurants. Town and Country Inns plc appointed business recovery and rescue specialists …
Begbies Traynor opens new office in Taunton
Begbies Traynor opens new office in Taunton
The UK's leading independent business recovery practice, Begbies Traynor, has opened an office in Taunton.  The move will enable the firm to build on work it has already done in the town and with the…
Brexit uncertainty puts the brake on London businesses
Brexit uncertainty puts the brake on London businesses
New research reveals that British businesses from Land's End to John o' Groats have shown surprising resilience since the EU Referendum result was announced, with levels of financial distress falling…
UK businesses remain resilient in the face of Brexit
UK businesses remain resilient in the face of Brexit
UK businesses across nearly every sector of the economy were showing positive signs of stability following the EU Referendum, new research from Begbies Traynor, the UK’s leading independent insolven…

Advice You Can Trust

Insolvency Practitioners Association Institute of Chartered Accountants in England and Wales R3: Association of Business Recovery Professionals ICAEW Business Advice Service Turnaround Management Association ACCA (the Association of Chartered Certified Accountants) ICAS | The Institute of Chartered Accountants of Scotland
Menu