The council, which is the UK’s leading insurer for new or refurbished residential properties, claims the Big Four firm failed to advise it, following a change in the law in 2005, that it was no longer required to pay tax on increases in the value of its investments in index-linked, gilt-edged securities.
As a result, The Times reports, the council paid too much tax every year from 2006 until 2016 when PwC finally flagged the problem.
By then, the amount NHBC had overpaid totalled £41.4m. It was able to claim back £13.8m from HMRC for the years 2012 to 2015, but the four-year time limit on making claims for tax computation errors meant that it could not claim back earlier payments.
The claim, which has been lodged in the Commercial Court, alleges negligent provision of tax advice and audit services and the council is seeking to recoup the outstanding £27.6m plus £7.3m interest. It states that “any reasonably competent tax advisers” would have been aware of the change in the law.
Neither NHBC nor PwC would comment on the case, although The Times reports that PwC has accepted that it breached its duty to its client when it failed to spot the tax issue.
However, the firm is arguing that provisions in its contract prevent the council claiming losses before 2012 and impose a limit of £5m on any loss or damage.