In Michael Bentley v HMRC  TC7989, an IT consultant failed to persuade the First Tier Tax Tribunal (FTT) that he was incapable of understanding the consequences of failing to act on a Follower Notice (FN). He was a literate thinking man and HMRC had told him in clear and categorical terms what was required of him following service of the FNs.
- The appellant participated in a tax avoidance scheme for the years 2006/07 to 2008/09.
- The scheme tried to avoid the IR35 rules and was defeated by HMRC in 2011, see Huitson, R (on the application of) v Revenue and Customs  EWCA Civ 893.
- HMRC issued Follower Notices (FNs) against the taxpayer in 2017, these force a taxpayer to correct a tax return in its favour where it considers that a taxpayer has not followed a judicial ruling.
- The FN was accompanied by Accelerated Payment Notices requesting payment of the amount of tax that is in dispute.
- Mr Bentley refused to comply and in 2019 HMRC assessed tax penalties of £80,211, some 42% of tax due.
- His tax consultants, Montpelier, had said that no tax was due and should not worry and that the FNs would be withdrawn following a successful human rights or judicial review challenge.
- He had written to his MP Dominic Raab several times on the issue and was going to have to pay between 20% and 70% more tax due to the scheme failure: this was unfair.
- He had complaints about HMRC’s case management and explanations of the tax charge.
The FTT did not accept any of the excuses:
- Mr Bentley’s protests to his MP were made after the date on which he should have taken action against the FNs. All the evidence in relation to the MP’s correspondence was not relevant to the penalty appeal.
- Mr Bentley was a literate thinking man and capable of understanding the contents of the FNs and APNs and HMRC's covering letter which explained was meant by taking corrective action and the consequences of failing to do so.
- It is one thing to rely entirely on a tax advisor when there is no indication that HMRC would take a contrary view to the advice of that adviser. But here, Mr Bentley had been told in clear and categorical terms what was required of him following service of the FNs.
- In light of the rock of Montpelier’s advice and the hard place of HMRC’s reflection of the position in the FNs, the appellant should have sought independent advice.
- It did not see the interpretation of the FNs as being the exclusive province of a tax expert. They are couched in plain English; they set out precisely what is required of a taxpayer and the consequences of failure
- The judge added, "I strongly suspect that the Scheme was mis-sold to the appellant. But having engaged with the tax system by entering into the Scheme, he should have continued to engage with it following service of the FNs."
The FTT did though use their powers to reduce the tax penalties. The taxpayer received no discount for failing to take corrective action but allowed a reduction in terms of co-operation, leaving a penalty of 24% of the denied tax advantage.
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