Failure to Recommend Offshore Tax Avoidance Scheme Not Negligent

The Court of Appeal has overturned the decision of the High Court that a firm of accountants had acted negligently when it failed to point out tax saving opportunities to a client when he sold his company.

The accountants had failed to bring to the attention of the client the tax saving opportunities available to him because of his not being domiciled in the UK. The best advice in the circumstances would have been to have moved the company to an offshore trust prior to sale. This was not advised.

Wishing to avoid a Capital Gains Tax bill of £850,000, the client instead spent £200,000 joining in a tax planning scheme which was subsequently closed down by HM Revenue and Customs.

The client then sued his accountants for failing to give him the correct advice. The High Court accepted his claim, concluding that the accountants had a contractual duty to give him tax planning advice and that a normally competent accountant would have done so.

The accountants took their case to the Court of Appeal, which examined the terms of the client's engagement letter and found that the accountants were not and had never held themselves out to be specialist tax planners. The Court was not persuaded, therefore, that the firm was under any duty to advise the claimant of significant tax advantages which were outside the ambit of its instructions.

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