An accountant carried out a due diligence report for a longstanding client for the purchase of shares in a specialist firm. The accountant had not carried out work of this type before but felt obliged to assist his client. The bank subsequently funded the purchase based on the accountant’s report.
It later came to light that this specialist firm was in serious financial difficulty and the client who purchased the shares was unable to repay the loan instalments to the bank.
The bank instructed Baker Tilly (which was eventually appointed as administrators) to undertake a review. Baker Tilly identified a 'systematic and historic manipulation of vehicle leasing, financing, invoicing and accounting', which the accountant had failed to identify.
The bank made a claim against the accountant and the vendors for over £2m, while the legal costs to defend the accountant were in excess of £100,000.
An accountant incorrectly told a client that entrepreneurial relief would be available on the CGT payable on the sale of the claimant’s share of the family business to other family members.
The claim failed following an HMRC enquiry and the client made a claim against the accountant for £280,000 in addition to tax, penalties and interest.
The client then appointed a tax specialist who identified that the client could have utilised rollover relief if the accountant had originally given the correct advice, and made a further claim for an additional £120,000. The claim was eventually settled for £420,000 including legal costs.