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Accountants breathe a huge sigh of relief

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The recent decision from the Court of Appeal in Mehjoo v Harben Barker has given accountants something to be happy about following the worrying decision previously given in the High Court.

In June 2013 Mr Mehjoo was awarded £1.4 million in damages by the High Court ordered against his accountants, Harben Barker. The High Court found that Harben Barker had failed in their duty of care in relation to giving tax advice over specialist non-domiciled status tax planning opportunities.

Essentially when Mr Mehjoo sold his business in 2004 he realised a capital gain of £8.5million which resulted in a capital gains tax bill of £850,000. However, as Mr Mehjoo carried a non-dom status he could have transferred his business to an off shore trust and then sold it CGT-free.

The case against Harben Barker in the High Court was successful for their failure to advise Mr Mehjoo on this particular issue. However, the Court of Appeal overturned the decision arguing that such advice was specialist in nature and that a reasonably competent accountant would not be aware of such schemes.

The decision is of huge importance to accountants and other professionals advising clients on particular issues.  It also gives a reminder to all professionals to review the terms and conditions of their retainers with their clients and to regularly keep them under review.  In particular retainers ought to include in as much detail as possible the parameters of the advice being provided and more importantly perhaps what NOT is being provided.

Liam Waine, Partner and specialist in professional negligence claims