UK property developer sues PwC over negligent tax advice

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A British property developer has taken PwC to the High Court in London, claiming the Big Four accounting firm gave it negligent tax advice that resulted in a $3 million bill from the UK tax authorities.

Revelan, a commercial property developer previously backed by U.S. investment management firm Ares, is seeking about $6.6 million in damages, claiming the consulting firm failed to accurately calculate the taxes the group would have to pay over a five-year period, according to court documents obtained by the Financial Times.

The documents show that some of the mistakes PwC admitted in its letter to HM Revenue & Customs resulted in Revelan slapping a total bill of $3 million on the tax authority. The bill included unpaid tax, unpaid interest and late payment charges.

This is the latest in a series of lawsuits against Big Four consulting firms over their tax advice work. Last month, rival EY settled a case with HMRC over allegations that it made misrepresentations during settlement talks with the tax authority.

In the PwC case, the firm admitted its advice to Revelan was flawed in a letter to HMRC dated March 2023, a fact disclosed in court documents.

The Big Four accounting firms said that our client's tax issues were complex, and unfortunately the mistake was overlooked because the tax issues were quite complex.

The report added: “Our clients have historically taken due care in preparing their tax returns with advice from PwC and we believe that no further steps could have been taken to prevent these errors from occurring.”

We therefore consider that this error was a result of an error committed by PwC despite the Client exercising reasonable care, and not a result of any negligence on the Client's part.

The case against PwC, set out in a 64-page court document including eight appendices, centers on the firm's alleged miscalculation of Revelan's tax liabilities and its failure to properly index the so-called tax write-down value of the group's assets while acting as an advisor.

In a March 2023 letter, PwC said a previous error had resulted in additional indexing deductions being claimed on various property disposals, which had resulted in increased capital losses on a number of property disposals.

Revelan alleged that PwC failed to exercise reasonable skill and care in providing tax compliance and consulting services, acted negligently and breached the duty of care owed by PwC to companies within its group.

The lawsuit is the first major suit brought against PwC's UK business since former PwC consulting leader Marco Amitrano took over as senior partner in July.

PwC, which has yet to file a defense with the court, said: “We will vigorously defend this claim.”

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