HMRC have opened a new consultation ‘Follower Notices and penalties‘ inviting views on proposed changes to penalties that may be charged to people receiving Follower Notices as a result of using avoidance schemes.

  • A Follower Notice is a legal request by HMRC to a taxpayer who has used a tax avoidance scheme to remove the tax advantage they have claimed, for example by amending their tax return.
  • Follower Notices (FN) can only be issued when the scheme has been defeated in another person’s litigation. If corrective action is not taken by the deadline set out in the notice the recipient will incur a penalty.

The new consultation proposes to:

  • Reduce the rate of Follower Notice penalty from 50% to 30% of the tax in dispute.
  • Introduce a penalty of 20% for those who the Tribunal decides acted unreasonably by continuing their litigation against HMRC’s decision.

Consultation questions

  1. Do you agree that reducing the penalty rate would better balance the objective of FNs to discourage further litigation of points already settled with the rights of taxpayers to continue genuine disputes?
  2. Do you have any further suggestions to better achieve this balance?
  3. How effective do you believe a further penalty would be as a deterrent to timewasting litigation of avoidance schemes?
  4. Are the suggested criteria the correct ones to adopt? Do you have any further suggested criteria to apply?
  5. Are these the correct conditions to apply before such a further penalty can be issued? If not, what other criteria do you suggest?
  6. Do you believe the further penalty should be reducible to reflect further cooperation by the recipient of a FN? If so, what factors should be taken into account?
  7. Would these grounds of appeal provide sufficient safeguards for taxpayers incurring this penalty? Are there any other appeal grounds you think should be applicable? 

The consultation closes on 27 January 2021. Responses should be sent to: This email address is being protected from spambots. You need JavaScript enabled to view it.

Useful guides on this topic

Accelerated Payments & Follower Notices
What are Accelerated Payment and Follower Notices? When can HMRC issue them? What rights does a taxpayer have? 

External link

Consultation: Follower Notices and penalties