Accountant must be competent

The taxpayer worked as a contractor in the construction industry. For the years 1998 to 2002 he used an accountant to prepare his annual accounts and tax returns. The 1999 and 2002 figures for stock and work in progress were estimated.

HMRC opened an enquiry into the taxpayer’s 2001 tax return and as a result decided the taxable profits had been misstated for several years. The department issued discovery assessments for the relevant years alleging that the accountant’s actions amounted to negligent conduct.

The taxpayer appealed.

The First-tier Tribunal found that for periods before the application of FA 1998 s 42 it was generally accepted accounting practice to follow applicable published accounting standards unless there was good reason not to.

The judges said an accountant acting for a client should reasonably be expected to show...