A tax adviser can be liable if careless tax advice has demonstrably caused additional loss. The tax that would also have been payable with a correct approach is generally not damage. Above all, examine which lawful and workable alternative you missed out on because of the error.
What was the tax engagement?
An engagement to file a tax return is something different from advice on a business succession, restructuring, emigration or real estate transaction. Record which question you asked and which facts the adviser knew. Advice based on an incorrect assumption may be careless, but the information you supplied yourself is also relevant.
An adviser does not have to guarantee every conceivable tax advantage. However, their approach must suit the engagement and they may have to warn about foreseeable risks. Uncertainty about the interpretation of tax rules must also be clearly distinguished from a certain outcome.
Missed scheme, deduction or objection
Examine whether you actually met the conditions for the desired tax treatment. A missed deadline is only financially disadvantageous to the extent that a timely request or objection could have produced a better result. The conditions and the evidence available at the relevant time are important.
First have it assessed whether the situation can still be remedied, for example by a correction, an objection or a request under the applicable tax rules. Not every remedy is always available. Holding the adviser liable does not extend any tax time limit and does not prevent any collection measure.
Calculating damage: actual position versus position without the error
Prepare two substantiated calculations: the actual tax and cost position, and the position with careful advice. Take into account the costs of the alternative, later tax consequences and conditions that you would have had to meet. A structure that was only attractive on paper but was not workable in practice does not provide a reliable comparison.
Tax interest, penalties, remedial costs and missed opportunities must also be assessed separately. Sometimes the issue is a lost real chance of more favourable tax treatment. That requires an estimate of the chance of success, not automatic compensation of the maximum advantage.
Who is responsible for the error?
In tax files, a bookkeeper, accountant, civil-law notary and tax adviser may work together. Map out their tasks and how information was passed between them. More than one party may be involved, but you cannot be compensated twice for the same damage. General terms and conditions and limitations of liability deserve separate attention.
Evidence for the assessment
- Your request for advice, engagement letter and general terms and conditions.
- Written advice, calculations and assumptions.
- The financial and personal data you supplied.
- Tax returns, tax assessments, decisions and objection documents.
- Documents showing that the alternative scenario was feasible.
- A comparison of the actual and hypothetical tax position.
Complaint or civil claim?
Some tax advisers are members of a professional organisation with a complaints or disciplinary scheme. Check which scheme applies to your adviser. That route does not automatically have the same powers as the civil court. Have your claim for damages and the time limits assessed independently.
Frequently asked questions
Is a higher tax assessment always damage caused by the adviser?
No. Only the loss compared with the correct, achievable tax position comes into consideration.
Do I still need to lodge an objection?
Have that examined immediately. Making use of reasonable remedies can prevent further damage.
Is my bookkeeper also a tax adviser?
That depends on their role and engagement. Also read holding a bookkeeper liable and holding an accountant liable.
Source
Supreme Court 21 December 2012, ECLI:NL:HR:2012:BX7491 on loss of a chance in the case of a professional error.
Time limits, costs and your next step
Report the suspected error in good time and in concrete terms. A complaint and interrupting the limitation period are different acts. For claims for damages, a period of five years after actual awareness of the damage and of the liable person often applies, but special rules and other time limits may apply. Have the time limit for your own file checked.
Responsible lawyer: Onur Arslan. Contact us with a brief description and any urgent deadline. Discuss in advance the scope and costs of the investigation, possible expert costs and litigation risks. Recovery of all costs is not guaranteed.
See also the general professional liability guide for a step-by-step plan, a file checklist and an explanation of damage, causation and complaints procedures. Legal basis: Book 7 of the Civil Code (duty of care), Book 6 of the Civil Code (compensation and the duty to complain in time) and Book 3 of the Civil Code (limitation and interruption).
