West Midlands accountancy firm Harben Barker succeeded in convincing the Court of Appeal to overturn the £1m negligence claim brought by a client who alleged they had not advised him properly about his tax avoidance options as a non-domicile.
Mehjoo was an entrepreneur who was granted asylum in the UK in the 1980s and became a UK citizen in 1996. During the 1990s he built up the company Bank Fashion, which he sold for £8m in 2004. He paid £800,000 in tax under the CGT taper relief that applied at the time, but then attempted to shelter his money in a capital exemption scheme arranged by Montpelier. When the scheme failed and Montpelier went bust, Mehjoo was advised to sue his accountants.
At the initial trial, KPMG’s David Kilshaw testified that as because of his background, Mehjoo could be considered as a non-domiciled taxpayer, so he shouldn’t have entered a capital redemption scheme - a bearer warrant scheme would have been more appropriate.
Bearer warrant schemes are not the domain of most High Street accountants. But the implication of the original High Court verdict from Mr Justice Silber was that even if an accountancy firm didn’t know of such esoteric arrangements, it should refer clients to specialists in that area.
The decision put the six-partner firm through a nightmare that could have closed down their firm.
However, the appeal court judges...