Professional negligence claims can help to recoup losses caused by negligent advice, but only if the claimant acts quickly. This is not always straightforward, however, particularly if those losses take many years to materialise. Here, we explain the law concerning limitation in professional negligence claims and explore ways in which claimants may be able to buy themselves more time.
An accountant has advised their client that their company is VAT-exempt. This advice was given over many years, first in 2009, and subsequently in 2014 and 2021. In 2024, however, the client begins to suspect that this advice is wrong and receives an enquiry from HMRC.
In 2025 the client decides to issue a claim for professional negligence against its accountant. There is a problem, however. Any loss incurred before the advice given in 2014 would be time-barred, leaving nearly five years of losses unrecoverable for the claimant.
What is limitation?
Limitation refers to the period of time during which a claimant can bring a claim against an alleged defendant. It is governed by the Limitation Act 1980 (‘the 1980 Act’), which specifies limitation periods for a wide range of claims, such as defamation, theft, and damage or defects in relation to buildings.
Once a limitation period is exceeded, a claim becomes ‘time-barred’. This provides a complete defence to the alleged defendant and means that a claimant cannot bring a claim for losses suffered, even if that claim is valid.
What are the limitation periods for professional negligence claims?
Limitation periods also apply to professional negligence claims, but the point at which the clock starts ticking will depend on the type of claim being brought.
For a claim in contract, where one party breaches duties or obligations that were mutually agreed, claimants have six years from the date of the breach in which to bring a claim. In the context of negligent advice, this would be from the date on which the professional adviser gave the bad advice.
Claims in tort, where one party breaches legal duties owed to another, are slightly different. In this case, the limitation period is still typically six years, but it starts from when the cause of action accrues. In other words, time starts to run from when the damage is suffered, which may not necessarily be when the advice was given.
What if I didn’t know the advice was negligent until later?
Limitation periods for professional negligence claims can be difficult to navigate, particularly when it is not immediately apparent that advice was wrong and caused loss.
For negligent tax advice in particular, claimants may not become aware of an issue or potential liabilities until many years have elapsed, by which time any potential claim may have become time-barred.
A potential lifeline exists for claims in tort, however. Under section 14A of the 1980 Act, claimants may be able to extend the limitation period by three years if they did not have knowledge of all the material facts when the cause of action accrued.
The date from which the three-year extension period will start to run is when the claimant had the required knowledge about the claim. This is not always easy to define, however, and will be highly specific to the facts of a particular case.
In broad terms, the extension period will start when the claimant knows, or should have known:
- Material facts about the loss suffered;
- The defendant’s identity; and
- That the loss was attributable, in whole or in part, to the act or omission that is alleged to constitute negligence.
Regardless of whether a three-year extension is secured, however, claims are subject to a 15-year ‘longstop’. This means that the claimant cannot make a claim 15 years after the cause of action accrues, even if they were not aware that the advice was negligent until that point.