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Extent of duty of care

06 August 2012
Issue: 4365 / Categories: Tax cases , VAT
Arrowhead Capital Finance Ltd (in liquidation) v KPMG LLP, Queen’s Bench Division

A company traded in mobile phones and appointed KPMG to ensure it would be able to claim input VAT. The agreement was between the business and KPMG and did not create third party rights.

The trader arranged a loan with the claimant company Arrowhead Capital Finance Ltd.

After an investigation by HMRC the mobile phone firm ceased trading and defaulted on its loan. It was later ordered to be wound up and was dissolved. HMRC rejected a claim to recover VAT on purchases.

The claimant business began negligence proceedings against KPMG on the basis the adviser owed a duty of care as an investor in the mobile phone trader.

KPMG sought summary judgment.

The Queen’s Bench Division said it was ‘inconceivable’ that ‘any reasonable businessman would have considered that KPMG was voluntarily assuming an unlimited responsibility towards potential investors’ in the mobile phone firm.


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