A7.247 Follower notices

A7.247 Follower notices

For the latest New Development, see ND.1840.

HMRC explains that where a tax avoidance scheme is mass-marketed, a large number of returns may be received, all based on the same assumption that the scheme will have reduced the person's tax liability in a particular way, resulting in large numbers of appeals against HMRC's conclusion that the arrangements do not work. When faced with a large number of very similar cases, HMRC investigates 'representative cases', taking them to litigation if necessary. Before follower notices were introduced, if HMRC won a representative case in the courts, other taxpayers who may have used the same or very similar schemes were under no obligation to settle their cases with HMRC.

With effect from 17 July 2014, new legislation is intended to provide for faster settlement among users of avoidance schemes that have failed in the courts, and provide for new powers to collect tax in avoidance cases before the taxpayer's appeal rights have been exhausted. HMRC may issue a 'follower notice' to taxpayers who they consider have used schemes which are defeated in another party's litigation, to the effect that they should amend their tax returns to reflect the outcome of the decision, or face a tax-geared penalty if they cannot not satisfy HMRC there is a reasonable basis for not doing so. The taxpayer has a right of appeal against any penalty charged under these provisions1.

Receiving a follower notice is a serious event, and a taxpayer would be unwise to ignore such

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