Common Mistakes in Economic Loss 1 - Loss based on short period.
As forensic accountants, acting for either the plaintiff or defendant, we often see claims for economic loss in commercial litigation and personal injury based on a level of income that is only for a short period of time.
Where the basis of probable earnings is over a short period, the likelihood that other factors unrelated to the accident or damage that may explain the variance can be introduced. Factors unrelated to the accident or damage may include seasonal variations in sales, loss of key customers, timing differences, change in accounting policies, sales delayed. Choosing a longer period for the basis of probable earnings will limit the likelihood that other external factors will be significant.
Sometimes the short periods of loss are harder to prove that long periods. For example, a builder who claims he lost one contract as a result of the accident or damage. The economic loss in that instance will be reliant upon other non-financial evidence such as statements from the builder and the supplier.
Other examples include losses based on a limited number of payslips where significant overtime is involved. An examination of the annual earnings or the payslips for a longer period of time will often reveal that the overtime is seasonal, infrequent or not maintained over a longer period.
Disclaimer: The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. All content relates to the current financial year only. Future changes to tax laws, thresholds or administrative requirements may affect the accuracy or relevance of this information, so you should always confirm that the guidance remains current. While every effort has been made to ensure accuracy at the time of publication, Dolman Bateman accepts no responsibility or liability for any loss or damage arising from reliance on this information. You should seek professional advice tailored to your circumstances before making any financial or tax decision.
