--- title: "Accountant Failed to Warn About Tax Liability: Can I Claim?" url: https://professionalnegligenceclaimsolicitors.co.uk/accountant-failed-to-warn-about-tax-liability-can-i-claim/ date: 2026-09-25 modified: 2026-09-25 lang: en author: "Qasim Mehmood" description: "If your accountant failed to warn you about a tax liability, penalty or tax planning opportunity, you may have a professional negligence claim. Find out when an accountant's failure to warn may give rise to compensation, what losses you may recover and why acting promptly is important." categories: - "Case study" - "Cases" - "Contracts" - "Court of Appeal" - "High Court" - "Lawyers" - "legal" - "Legal Negligence" - "Letter Before Action" - "Letter Before Claim" - "LEXLAW" - "Limitation periods" - "Litigation advice" - "Media" - "negligence" - "Negligence Claim" - "News" - "Pre Action Protocols" - "professional negligence" - "Professional Negligence Cases" - "Settlement" tags: - "accountant claims" - "accountant liability" - "accountant negligence" - "accountant negligence claim" - "financial loss" - "hmrc penalties" - "lexlaw" - "negligent accountant" - "Professional negligence" - "tax advice" - "tax advice negligence" - "tax dispute" - "tax liability" - "tax negligence" - "tax penalty" image: https://professionalnegligenceclaimsolicitors.co.uk/wp-content/uploads/Accountant-Failed-to-Warn-About-Tax-Liability-Can-I-Claim-1024x683.png word_count: 1487 --- # Accountant Failed to Warn About Tax Liability: Can I Claim? Many[ taxpayers](https://lexlaw.co.uk/hmrc-tax-dispute-lawyers/) only discover a problem with their tax affairs when HMRC issues an assessment, a penalty notice, or a demand for unpaid tax and interest. In some cases the underlying cause is not the taxpayer's own conduct but their accountant's silence a tax liability, deadline, or planning opportunity that a competent accountant should have flagged and never did. Where that silence causes financial loss, it can amount to [professional negligence](https://lexlaw.co.uk/practice-areas/professional-negligence-solicitors-london/), giving rise to a claim for compensation against the accountant or their firm. This article explains when a failure to warn crosses the line into actionable negligence, what the courts have said about the scope of an accountant's duty, what can realistically be recovered, and the strict time limits that apply. If you believe an accountant's failure to warn you has cost you money, early advice from [specialist professional negligence solicitors](https://professionalnegligenceclaimsolicitors.co.uk/) is essential, since limitation periods run from the date of the breach and not from the date the tax bill eventually lands. ## Does an Accountant Owe a Duty to Warn About Tax Liabilities? An accountant engaged to prepare accounts, file returns, or advise on a transaction owes a client a contractual duty under the engagement letter and a concurrent duty of care in tort, as confirmed by the House of Lords in [Henderson v Merrett Syndicates Ltd [1995] 2 AC 145](https://www.oxbridgenotes.co.uk/law_cases/henderson-v-merrett-syndicates). Where an accountant gives advice knowing the client will rely on it, the foundational authority is [Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465](https://www.lawteacher.net/cases/hedley-byrne-v-heller.php), which established that a professional who assumes responsibility for advice can be liable in negligence for getting it wrong, even absent a contract. The scope of that duty is critical in tax cases and is fact-specific. An accountant retained only to prepare a single set of statutory accounts is unlikely to owe a duty to advise on unrelated tax planning. However, where an accountant acts on an ongoing basis and is aware of facts that ought to have prompted a warning or a referral to a specialist, the duty can extend much further. This was considered in [Mehjoo v Harben Barker [2013] EWHC 1500 (Ch)](https://www.charteredaccountants.ie/taxsourcetotal/taxpoint/digest/2013/07/2013-07-1.html); [[2014] EWCA Civ 358](https://www.bailii.org/ew/cases/EWCA/Civ/2014/358.html), where the Court of Appeal held that a long-standing advisory relationship, combined with the accountants' knowledge of the client's non-domiciled status, meant they were arguably obliged to point him towards specialist tax advice before a significant capital gain arose, even though the claim ultimately failed on causation at the retrial. For a fuller discussion of how accountants' and tax advisers' duties are assessed, see our guidance on [claims against negligent accountants](https://professionalnegligenceclaimsolicitors.co.uk/compensation-negligent-accountants-financial-tax-advisors/) and on [negligent tax adviser claims](https://professionalnegligenceclaimsolicitors.co.uk/bad-hmrc-finance-advice-sue-advisor/). ### Want legal advice on the merits of your case? Your legal enquiry goes immediately to our PN litigation team in Middle Temple, London. We can't take on low value cases or give free legal advice - our minimum fee is £1750 +VAT for a conference with a solicitor and barrister. Call us on +442071830529. [Check My Case Now ✔](https://professionalnegligenceclaimsolicitors.co.uk/litigation-case-assessment-form/) ## What Counts as a Failure to Warn? A failure to warn typically arises where an accountant possesses, or should reasonably have obtained, the facts necessary to identify a tax exposure and simply does not raise it with the client. Common scenarios we see include: - Failing to flag an approaching VAT registration threshold breach - Not warning of clawback of incorporation relief or entrepreneurs' relief / Business Asset Disposal Relief on a restructuring - Overlooking [IR35](https://lexlaw.co.uk/solicitors-london/tag/ir35/) status changes affecting a contractor or personal service company - Failing to advise on the SDLT higher-rates surcharge on an additional residential property - Missing the remittance basis election deadline for a non-UK domiciled client - Failing to warn that a scheme or arrangement was likely to be challenged by HMRC - Not flagging payments on account or penalty exposure for late or inaccurate filing Where the failure relates to a marketed tax scheme rather than day-to-day compliance, the analysis differs slightly, see our dedicated article on [negligent tax scheme advice claims](https://professionalnegligenceclaimsolicitors.co.uk/negligent-tax-scheme-advice-claims-explained/) for how liability is assessed where an adviser recommended an arrangement that HMRC later defeated. ## Proving Negligence: The Legal Test As with any professional negligence claim, three elements must be established on the balance of probabilities: (1) the accountant owed a duty of care; (2) that duty was breached, judged against the standard of a reasonably competent accountant in the same field, not perfection; and (3) the breach caused a quantifiable financial loss. Our [Professional Negligence FAQs](https://professionalnegligenceclaimsolicitors.co.uk/professional-negligence-faqs/) set out this framework, and the same causation principles from [South Australia Asset Management Corp v York Montague Ltd [1997] AC 191](https://professionalnegligenceclaimsolicitors.co.uk/landmark-famous-uk-tort-cases-advice/) apply in confining recoverable loss to that which falls within the scope of the accountant's duty. ## What Compensation Can I Actually Recover? This is the point most clients misunderstand. In most cases, the underlying tax itself is not recoverable as damages, because that tax was legally due regardless of the accountant's failure, the claimant has not lost the tax, only the opportunity to plan around, defer, or mitigate it. What is recoverable is the additional loss caused by the failure to warn, which typically includes: - Penalties and surcharges that a timely warning would have avoided - Interest on unpaid tax that accrued because the liability was not identified in time - The value of a relief, election or restructuring opportunity that is now time-barred - Professional fees incurred unwinding the position or negotiating with HMRC - Consequential losses, such as the forced sale of assets or business insolvency caused by an unbudgeted tax demand Where the accountant's failure has pushed a company towards insolvency, our related team of [insolvency litigation solicitors](https://windinguppetitionsolicitors.co.uk/) can assist in parallel. Similarly, where the underlying dispute with HMRC still needs to be resolved before the negligence claim can be properly valued, specialist [HMRC tax dispute solicitors](https://taxdisputes.co.uk/) can run that side of the matter while the negligence claim against the accountant proceeds. For a general explanation of how damages are assessed, see [how compensation is calculated in a professional negligence claim](https://professionalnegligenceclaimsolicitors.co.uk/how-is-compensation-calculated-in-a-professional-negligence-claim/). ## Time Limits: Do Not Delay Claims against accountants are subject to strict limitation periods under the [Limitation Act 1980](https://www.legislation.gov.uk/ukpga/1980/58): six years from the date of the negligent act or omission (section 2), or, where the tax problem was not reasonably discoverable earlier, three years from the date the claimant had the knowledge required to bring a claim (section 14A). Because a failure to warn can predate the resulting tax bill by several years, clients are often surprised to learn how much of the limitation period has already run by the time HMRC's demand arrives. Full detail is set out in our guide to [limitation periods in professional negligence claims](https://professionalnegligenceclaimsolicitors.co.uk/limitation-period-in-professional-negligence-claims/). Legal advice should be sought as soon as the problem is identified. ## How Is a Claim Brought? A claim against an accountant must ordinarily follow the [Professional Negligence Pre-Action Protocol](https://www.justice.gov.uk/courts/procedure-rules/civil/protocol/prot_neg), beginning with a detailed letter of claim setting out the breach, causation and loss. The accountant, or more often their professional indemnity insurer, will investigate and respond within the protocol timetable. Many claims settle at this stage or through mediation with the insurer, without the need for court proceedings. Where settlement cannot be reached, proceedings can be issued in the County Court or High Court depending on value and complexity. ## Speak to a Specialist About Your Accountant's Failure to Warn Claims arising from an accountant's failure to warn about a tax liability turn heavily on causation and the precise scope of the retainer, and are rarely straightforward. Our qualified team of solicitors and barristers at [LEXLAW Solicitors & Barristers](https://lexlaw.co.uk/), based in the Middle Temple Inn of Court in the City of London, regularly advises clients on exactly this type of dispute. To find out whether you have a viable claim, [check your case](https://professionalnegligenceclaimsolicitors.co.uk/litigation-case-assessment-form/) or [contact our London office](https://professionalnegligenceclaimsolicitors.co.uk/contact-us-london/) on 02071830529. ### Want legal advice on the merits of your case? Your legal enquiry goes immediately to our PN litigation team in Middle Temple, London. We can't take on low value cases or give free legal advice - our minimum fee is £1750 +VAT for a conference with a solicitor and barrister. Call us on +442071830529. [Check My Case Now ✔](https://professionalnegligenceclaimsolicitors.co.uk/litigation-case-assessment-form/) ### Frequently Asked Questions (FAQ's) Can I still claim if I signed and approved the tax return myself? Yes, in most cases. You are entitled to rely on your accountant's expertise, and signing a return they prepared does not automatically bar a claim, although a court may make a deduction for contributory negligence if you had information you failed to pass on or ignored a clear warning that was in fact given What if the accountant has retired or the firm has closed down? This does not necessarily prevent a claim. Accountants are required to maintain professional indemnity insurance, and run-off cover typically continues after a firm ceases trading, meaning a claim can often still be pursued and satisfied Is there a minimum value for these claims? Given the complexity of tax causation arguments, this type of claim is generally only viable for higher-value losses.