PI Claim

PI Claim

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 I have a new client, we as of yet have not submitted anything for 2009/10.  She has sent me through a letter from HMRC, her previous advisor is under investigation, HMRC have given her a couple of months to make a full disclosure to HMRC.

She has only ever acted on the advice of the previous incumbent (she moved across to me as she started to feel she wasn't getting the personal touch).  I have very little info as of yet but it looks like we will need to revisit her previous 3/4 years of tax returns and review the previous assumptions.

What is the PII procedure for this?  Assuming the previous firm had PII actually in place?  Has anyone been through this before?

Any useful comments appreciated as using the wrong accountant may have cost my client dearly and I don't see why she should not get something back from the firm when they have instructed her negligently.  If they don't have PII in place I assume this becomes a civil case?

Thanks

Peta

Replies (5)

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By julian.sims
30th Sep 2010 14:22

work re PI claim

I would assume that your client has two potential areas of claim against the old accountant. Firstly for the costs of putting right their work and dealing with HMRC on the issue.  Secondly for any penalties charged by HMRC if additional tax is payable.

One difficulty may be when your client puts the previous accountant on notice of the potential claim if you may still need information from him. 

The important thing is to establish whether he has PI - since last year this should be disclosed somewhere to clients (perhaps T&C's, Letter of Engagement or Website) under the Provision of Services Regulations 2009.  This will help to establish whether there is any benefit in pursuing a claim - not worthwhile if he is a 'man of straw'.

We have occasionally dealt with this type of situation and a few lessons learned are :

- keep accurate records and show detailed invoice narrative identifying what is routine work and what are extras dealing with the historic problems.
- deal with your work on a realistic payment basis, don't rely on the client covering your costs from settled claim.
- make sure your client tells you everything up front about there financial affairs, you do not want to have futher problems coming out while you are dealing with HMRC on this.

It is not clear what you have been told about the previous accountant and what HMRC's concerns about your clients affairs are.  However, I think you need to get clear in your mind how culpable the client was and particularly whether they should have known there tax affairs were wrong.  We have had one incoming case where the HMRC view was that it was so wrong the client must have known their profits were understated.  This will be important in minimising any penalties which will be important if a claim against the accountant or PI insurer fails.

The positive is it sounds as though it will be an interesting case.  I would suggest some early initial advice from a good professional negligence lawyer - too often a case appears clearcut to an accountant, but looks a bit different when you work through what needs to be proved in a negligence claim.

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By peta1
30th Sep 2010 17:01

helpful

 Thanks for your reply, really helpful - hadn't considered the perspective of why weren't some assumptions questioned/challenged by client in relation to penalty mitigation - will think about that one.

I sincerely hope there is PII insurance in place - have yet to find evidence of it on their website - still waiting on a shell shocked client....

Peta

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By chrisjoynes
09th Oct 2010 10:11

Really helpful reply - thank you

Hi,

Strangely going through a similar situation currently with a client, thanks for the really detailed reply - has helped a great deal.

.......................................................................................................................................

123 Contracting

Contractor accountants

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By Trevor Scott
09th Oct 2010 21:32

Don't jump the gun...

Lawyers will gladly give you general advice of negligence claims, and bill you into the bargain, but before giving specific advice they will probably first tell you to go away and establish the actual facts...such as whether there has been any wrongdoing at all. Based upon the information in your posting, at present you have no evidence of any actual errors/wrong doing whatsoever.

HMRC send out many types of letters in the hope of pricking the conscience of tax evaders, therefore they aren't necessarily anything to worry about.

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By carnmores
19th Oct 2010 12:39

bear in mind that if you do go legal

you are unlikley to recover all your legal fees

so its a matter of quantum do you have any idea of the possible loss

and if you cannot recover your costs from the previous are you expecting the client to pay all

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