Liabilty for Errors

Davidbyworth

I am looking to start a small practice and will be hoping to provide tax return and VAT return services. Can I ask what liability I/the practice would have for any errors made, for example missing an area that may have meant a client paid less tax? I assume HMRC will provide any due refund but is there advice on how best to deal with such issues?

Monsoon

If you miss an area where your client could have paid less tax, and they don't find out, and you don't realise it, it won't come up. If it was a relatively obvious area, and they find out, then you are probably liable for any loss to them (this is why we have to have PII). HMRC will provide any due refund providing you're in time to make a correction and it's within the rules. Does that help?

Davidbyworth

Thanks that does help. I will be dealing with relatively low level returns so a financial impact should be manageable to resolve. Generally with PII would cover increase if claims were made?

Monsoon

I would assume so, yes. The excess on PII is usually at least £500, so it's only worth claiming if it's a big deal.

burg

You may find that you insurer also want you to inform them of any potential claims. I had a potential claim once. Although the potential claim was low I got advice to speak to my insurers. Actually it is a condition of the cover to inform them of any claim. They were really good and helpful helping me to assess the situation and confirming that I was within the law and the terms of our engagement and helped in how to respond and what actions to take.

Monsoon

burg said:

You may find that you insurer also want you to inform them of any potential claims. I had a potential claim once. Although the potential claim was low I got advice to speak to my insurers. Actually it is a condition of the cover to inform them of any claim. They were really good and helpful helping me to assess the situation and confirming that I was within the law and the terms of our engagement and helped in how to respond and what actions to take.

Agreed. I too had something similar come up, I spoke to my insurers, they advised me on how to proceed. They agreed with me in that there was no case to answer, but it was an interesting process (after it stopped being stressful!).

The main point of note was that I was to reply as if just from me and not to mention insurers - as once someone knows they are involved, they will push for more money. Clients know we are insured anyway, but the insurers are just covering their back. Even if it went to a claim and payout, in theory the client would only ever deal with me and assume it was my money they were receiving.