Tax is a part of everyday life. We all come across it in some form. Whether it’s Income Tax, Corporation Tax, Inheritance Tax, Capital Gains Tax or Stamp Duty Land Tax, at some point it is likely you have taken advice from a professional to help you manage what you pay.
But what if that advice led to you suffering financial losses? Here we take a look at two ways in which money can be lost through negligent tax advice, and what to do about here.
Tax Avoidance Schemes
Accountants, financial advisers and tax specialists are often trusted by individuals and companies alike when it comes to finding ways to minimise tax payable. Some professionals will recommend tax planning arrangements, also referred to as ‘tax avoidance schemes’. These are widely publicised across the media, mostly in a negative light when high earning celebrities, sportspeople and organisations are put under the spotlight as they are informed by HMRC that the schemes they signed up for were actually not permissible.
If a tax adviser for example has recommended an unsuitable scheme, a flawed scheme or an illegal scheme, or has failed to provide sufficient advice to enable the taxpayer to fully understand the scheme and the risks involved in it, then this will generally be deemed negligence. If however a scheme was recommended that was permissible at the time, but was later classed as non-permissible by HMRC, then there is generally no claim to be made against the professional.
When HMRC decides that a tax avoidance scheme is not permissible, they demand repayment of the tax that should have been paid, together with penalties for late payment, and interest. For the highest earners, this will be an annoyance. But for everyday people and companies, it can be devastating.
It is important to bear in mind that not all tax avoidance schemes are illegal. Issues arise mostly when tax saving efforts become too aggressive, or do not take the law into consideration.
Many of the high profile taxpayers who hit the headlines for tax avoidance reasons would have gone on to make claims against their tax advisers for negligent advice. This sparked a wave of claims being brought by everyday people who’d experienced similar fates. But it is important to realise that it is only when a tax adviser has failed to perform their professional duties to the required standard that this will be classed as negligence.
If a tax adviser for example has recommended an unsuitable scheme, a flawed scheme or an illegal scheme, or has failed to provide sufficient advice to enable the taxpayer to fully understand the scheme and the risks involved in it, then this will be deemed negligence. If however a scheme was recommended that was permissible at the time, but was later classed as non-permissible by HMRC, then there is no claim to be made against the professional.
Wrongly Calculated Tax
Sometimes a professional may incorrectly calculate the tax payable by an individual or a company.
This could involve an accountant having failed to consider the correct levels of allowable expenses, capital depreciation and other appropriate tax saving processes when compiling for example a Self-Assessment tax return or preparing a Corporation Tax return. It could on the other hand be when working out the amount of Stamp Duty Land Tax (SDLT) due on the purchase of a property, or failing to advise on legal tax saving measures that can be used to reduce the amount of Inheritance Tax payable by the beneficiaries of an estate.
Since the changes to Stamp Duty were introduced in 2016, levying a three per cent surcharge on the purchase of second homes, HMRC has refunded £127 million to second homeowners who paid too much in SDLT.
The law around SDLT has become very complex since the change in the law, and it is not uncommon for professionals to miscalculate the amount due, leaving homeowners with bills substantially higher than they should be. In one reported case for example, a buyer of a flat named his partner as a guarantor and borrower on the mortgage. He was incorrectly advised that as his partner already owned a separate property, he was liable for the second home surcharge. He ended up paying £9,000 more than he should have done in Stamp Duty.
Whilst Inheritance Tax mitigation is a complex area, there are ways and means, such as charitable donations, trusts, passing an estate to a spouse or civil partner and lifetime gifting for example. Tax planning advisers who fail to make their clients aware of such possibilities could be classed as negligent and a claim made against them for any financial losses suffered.
Making a Claim for Negligent Tax Advice
Whether your solicitors miscalculated Stamp Duty Land Tax or did not correctly advise you about Inheritance Tax saving measures; or an accountant or tax adviser has signed you into a tax avoidance scheme that has turned out to be deemed non-permissible by HMRC, the expert professional negligence solicitors at London based Seth Lovis & Co. are ready to assist in helping you reclaim your financial losses.
Seth Lovis & Co. has a consistently successful track record in claims against financial professionals and solicitors. To discover whether you have a potential claim for negligent tax advice, give us a call on 0207 282 4289 or contact us by email at email@example.com.