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Is our Accountant liable for Mistakes?

Is our Accountant liable for mistakes? Written by: John A Waller, Consultant,  Reviewed: June 25th, 2024.

Who is liable for accountant errors?

As a limited company director, you are liable for ensuring the accuracy of the information submitted to HMRC and companies.

It is important to note that your Accountant either acts on your instructions or provides advice you sanction. Therefore, they do not remain liable unless conducting an independent company audit. Your company remains responsible for all charges if the information is incorrect.

Therefore, ensure your appointed Accountant has professional indemnity insurance.

Directors need to be aware that HMRC will maintain that the company’s director is legally responsible for confirming the accuracy of its information when submitting tax returns together with any other HMRC statutory filings.

Can an accountant be held liable for mistakes in your accounts?

“My Accountant was negligent and made mistakes in my accounts. Is he liable, and who will be held responsible for the additional money I owe HMRC?

Appointing an accountant to deal with your business’s financial elements requires you to trust them to file your accounts accurately. However, an accountant can file incorrect information, thereby exposing the company to:-

  • Late penalties
  • Additional fees to resolve and even
  • miss payments.

If such a scenario happens, directors seek damages from their accountants.

However, HMRC will not always view it this way. You remain legally responsible for ensuring the accuracy of your company’s self-assessment when filing taxes. Your Accountant acts as an agent of the business to handle that job. 

Is our Accountant liable for mistakes? – What, then, is the company liable for?

So the company is liable for:-

  • Taxes, 
  • fees, or 
  • Interest was incurred due to the Accountant’s mistakes. 

If you fail to pay these additional costs, HMRC could eventually move to wind up your company and put it out of business.

Example of An Accountant’s Liability

Accountants are liable for misstatements while auditing and preparing financial documents for clients. They often take out professional liability insurance because they are held responsible for inaccuracies and can face legal charges or monetary losses.

Contacting HMRC advising error

The fastest and easiest way to rectify the problem would be to contact HMRC immediately and notify them of the situation. They may grant you an extended deadline or work out a payment plan if you are short of funds. You may wish to consider appointing a new accountant to give you a second opinion and conduct a thorough audit of your accounts.

The answer depends on:-

  • Does the Accountant admit the error? If so, you may take action to recover your losses through the court. However, you may only use your Accountant if you have paid HMRC. Failing, the court will not allow the proceeding to go your way.
  • Does your Accountant have professional indemnity insurance (PI)? If not, you will have to sue them personally.

If your Accountant makes an error on your accounts and you owe more money to HMRC, you may be eligible for compensation. However, if your Accountant does not have professional indemnity insurance or is unwilling to claim against their insurance, first pay the tax you owe (or arrange an extension or payment plan) and then take the Accountant to court to obtain a judgment against them.

Suppose you have recently discovered mistakes in your accounts made by your Accountant. In that case, seeking professional guidance as soon as possible is essential to avoid the consequences of the Accountant’s error. Call the team at HBG Advisory today for free and confidential help.

Bounce Back Loan advice for Company Directors

Directors should seek professional advice if they have Bounce Back Loan worries regarding repayments. The UK government introduced the COVID-19 support scheme to support businesses through the pandemic. owever, repaying the loans has been difficult. So ensure you seek advice sooner than later.
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