Accountant wrongly told me I was VAT exempt

My former accountant advised me over a period of five years that I was VAT-exempt. He was incorrect with his professional advice. My VAT bill was £53,000. Is there anything I can do about it?

There may well be ways in which you can recover some of the money, either from the accountant or from the Revenue.

However, it will depend on how exactly the error arose, and possibly on whether the accountant has insurance.

You haven’t explained quite how you ended up with a liability. Normally, if you make supplies which are ‘VAT-exempt’ (i.e. no VAT is charged on them) then you suffer input tax on your purchases, but collect no VAT on your sales to offset it, which gives the same net result as being unregistered; you suffer irrecoverable VAT.

If the problem is that he said you were ‘exempt from registration’, but you were not (i.e. you should have charged all your customers VAT but haven’t) then you should also have been able to claim back some VAT on your costs.

You can only go back so far on this, and HMRC would need records to support the claims, but it would help offset the bill.

As far as claiming anything from the accountant themselves goes, it will help if they are a member of a reputable professional body.

They will be bound by standards of conduct, and if you cannot agree a settlement with the accountant direct then you can approach the professional body.

Also, a qualified accountant will generally have to be insured as a condition of practising, so if the accountant made a mistake then it should be covered, and funds would be available to reimburse you.

Bear in mind though that you can only claim if it was the accountant’s error (or possibly if they were misled by HMRC).

If the problem arose because you misled them in any way, then unfortunately the loss will be yours to bear, as it is simply HMRC putting the position right.

Ben Lobel

Ben Lobel

Ben Lobel was the editor of SmallBusiness.co.uk from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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