A businessman who incurred a capital gains tax (CGT) liability in excess of £800,000 on the sale of shares in his company as a result of negligent accountancy advice has triumphed in his High Court compensation claim. The court found, inter alia, that the accountants had failed to advise their client that he was potentially entitled to non-domiciled (non-dom) status and of the significant tax advantages that that would bring.
The businessman earned more than £8.5 million from the sale of his shares and was assessed for 10% CGT on that sum. The court found that his accountants owed a general duty to advise and assist him in respect of his personal tax affairs and to help him identify appropriate means of minimising his tax liabilities.
Had the accountants used all proper skill and care, the Iranian-born businessman would have become aware that he might be entitled to non-dom status and would have sought specialist tax planning advice in that respect. The court ruled that, had appropriate advice been given, he would have entered into a scheme which was only available to non-doms, which had an excellent record of success and which would have yielded very significant tax savings.
In the event, the businessman paid a substantial sum in order to enter into a tax management scheme which was available to UK residents but which ultimately failed, with the consequence that he had to pay penalties and substantial interest for late payment.
On the basis that the businessman was entitled to be put into the same position he would have been in had the accountants not acted in breach of duty, the court awarded him more than £760,000 in respect of the CGT that he was required to pay. He was also awarded £180,000 in respect of the costs of entry into the abortive scheme together with interest and other sums.