Are Accountants Liable For Making Mistakes On My Business Account?



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In the UK, this is a massive hot-button topic for many business owners, with conflicting claims coming in from every direction. The scenario goes like this; your company hires an external accountant to calculate and pay all of your taxes, but this accountant makes a mistake resulting in your business owing HMRC some money. This could be due to a number of reasons, from mistakes when filing, negligence, to misconduct, but all with the same result. If this happens then it can become a major issue for many companies.

In this situation, the company will be under the impression that it is the accountants fault, and that they are to blame, but unfortunately that is not how HMRC percieves things. You are always legally responsible for your company’s self-assessment taxes, and the accountant is hired as an agent of your business to do this, therefore fault is with the business, not the accountant.

Now there are a few ways to remedy this, but unfortunately all of them require some form of litigation or outside help. If your company can afford to pay the fees concerned, then the best advice is always to pay as soon as possible, and remediate later. If your business cannot afford to pay, then HMRC has the legal right to ‘extract’ the payment from your company; it may mean closing down, which nobody wants. By paying the fees litigation can be pursued, either from the accountants professional indemnity insurance (if they have this, it’s not a legal requirement) or by suing them personally. Filing a suit against them personally is often the only option left for many SMEs, but the compensation for such a case rarely covers the requirement.

Unfortunately, if your business cannot afford to pay to discrepancy to HMRC, then options are very limited. The business cannot sue the accountant personally, as you have technically not lost the funds you’re trying to sue for. In this situation, the best available option will end up costing a little bit of money anyway; hire an external auditor to check your accounts, and attempt to make an arrangement with HMRC after explaining the sitaution. HMRC will never waive a fee for a business, but they may be able to help set up a payment plan, or even extend the deadline to avoide interest and late fees.

Of course, this sitation is massively different if the accountant in question admits fault. Even without ‘professional indemnity insurance’ then the company may still successfully sue the individual for the original amount, interest, fees, and even compensation. As is common, most accountants will not admit fault even if fault is theirs alone, but this is not then end. Though it may take weeks to months for an issue like this to get sorted, it’s rare that an incident like this is unfixable, and an external auditor may prove to be the best option. The best policy is to use an industry recognised accountant with the appropriate insurance, for if an accident does happen.