Adviser wins as Mehjoo tax negligence ruling overturned

A MIDLANDS ACCOUNTANCY FIRM held negligent by the High Court after it failed to advise a client domiciled outside the UK of a tax avoidance scheme has claimed victory on appeal.

Iranian refugee Hossein Mehjoo – who had established a multi-million pound fashion business in Britain – successfully sued his local accountancy firm for £1.4m after it failed to recommend he enter an offshore tax avoidance scheme.

Mehjoo gained asylum in the UK in the 1980s after claiming his life would be endangered should he return to Tehran, and had attempted to avoid a £850,000 tax bill on the sale of his co-owned business, Bank Fashion.

In 2005, Mehjoo placed around £200,000 in an avoidance scheme run by former Top50 +50 firm Montpelier, which was then shut down by HMRC. He sued local firm Harben Barker whose advice he had previously followed, claiming that in not referring him to non-domicile specialists or drawing his attention to another scheme earlier – known as the Bearer Warrant Scheme – Harben Barker had acted negligently. After years of dispute, the High Court ruled in Mehjoo’s favour.

But that ruling was overturned today at the Court of Appeal, with judges Lord Justice Patten, Lord Justice Lewison and Lady Justice Sharp finding Mr Justice Silber’s High Court verdict “was wrong… to find that Harben Barker were in breach of duty and it is therefore unnecessary to consider the various issues raised about causation and remoteness of damage”.

Credit: Accountancy Age