Is an accountant liable for not incorporating my business?

Hi, I asked my previous accountant 3 times whether i should be a sole trader or a limited company. The first time when i set up my business in July (by this time my PAYE from my previous job for the tax year in question was already close to the 40% tax bracket). The 3rd/last time I asked (a few months later in the same tax year) was when my total earnings for the tax year had reached 6 figures. My business, costs and trading were fully known by my accountant and they had committed in writing to making my income tax as efficient as possible. I was finally incorporated in late January of the last tax year - 6 months after setting up my business and after generating a 6 figure total income for the tax year to that date.

This is not a 'kick the accountant' question. More a genuine desire to know whether the accountant (by not providing any information on the risks/benefits of sole trader versus limited company status when asked 3 times which was the most efficient status - and by stating in writing that they were on top of my accounts and would make my accounts tax-efficient) was potentially negligent in their advice and action? The accountant had committed in writing to taking care of all communication and interaction with HMRC and had stated in writing that they would minimise my income tax. I changed accountants last year as I felt I could not get proper answers.

My new accountant has just completed my sole trader accounts and self assessment and, as a consultant with relatively low costs, I now have notable excess profit liable to tax at 40%

My new accountant has stated that a limited company would have been far more beneficial to me tax-wise and that the decision not to incorporate will result in tens of thousands of pounds additional tax payment.

Am i being unreasonable in expecting to have a case to seek some form of financial redress? Or is it simply a case of you win some, you lose some when it comes to accounting advice? Note my accountant is ACCA accredited.

Comments
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No

Steve-EBL |
Steve-EBL's picture

My thoughts

mr. mischief |
mr. mischief's picture

IR35

ShirleyM |
ShirleyM's picture

I disagree

BKD |
BKD's picture

Goodwill, cash flow and a partner

Kent accountant |
Kent accountant's picture

It is not straight forward ...

Old Greying Accountant |
Old Greying Accountant's picture

Poor service, but . . .

davidwinch |
davidwinch's picture

Thanks, David

BKD |
BKD's picture

IR35

mhtax |

suspect it depends

justsotax |

@Mojo - Did you pay for detailed advice?

ShirleyM |
ShirleyM's picture

Poor . . .

davidwinch |
davidwinch's picture

The fault

BKD |
BKD's picture

IR35

I'msorryIhaven'taclue |

Claims for negligence

davidwinch |
davidwinch's picture

There Are Lots of Reasons Not to Incorporate

PatriciaRr |

Huh?

BKD |
BKD's picture

They don't

ShirleyM |
ShirleyM's picture

Thanks for all the feedback.

Mojo1999 |

Agreed, but . . . .

andy.partridge |
andy.partridge's picture

My MO is thus ...

Old Greying Accountant |
Old Greying Accountant's picture

Even more curious analysis

Steve-EBL |
Steve-EBL's picture

More precise

Steve-EBL |
Steve-EBL's picture

Yes David....sorry i realised that

justsotax |

See above

BKD |
BKD's picture

Hi all

Mojo1999 |

As pointed out

justsotax |

Is "5" the Answer?

I'msorryIhaven'taclue |

Tax savings may not be as high as you think

zarathustra |
zarathustra's picture

what about VAT?

Tonykelly |
Tonykelly's picture

Zara

kenny achampong |
kenny achampong's picture

Compliance costs & client abilities

DMGbus |
DMGbus's picture

Isn't hindsight wonderful?

Ken Howard |

The accountant had all my

Mojo1999 |

Incorporating your business

L Hunter |

hmm..

justsotax |

I am not sure you would get anywhere with legal action

Glennzy |
Glennzy's picture

Bottom line is ...

Old Greying Accountant |
Old Greying Accountant's picture

I think there is another bottom line

BKD |
BKD's picture

Sounds like a case to me...

AdShawBPR |

IR35

JDW |

'Girlie'?

emilyduffy |

my 2 p worth

Tom 7000 |
Tom 7000's picture

Thank you again for your

Mojo1999 |

And at any point did you say incorporate my

justsotax |

IR35

jndavs |
jndavs's picture

I'm an accountant ...

Old Greying Accountant |
Old Greying Accountant's picture

Negligent acts or omissions

davidwinch |
davidwinch's picture

My thoughts

Jason Dormer |
Jason Dormer's picture

This thread ...

Old Greying Accountant |
Old Greying Accountant's picture