A7.247 Follower notices

Follower notices

A7.247 Follower notices

With effect from 17 July 2014, HMRC has the ability to issue a follower notice. This means that 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 rationale for the introduction of this power is that it provides for faster settlement among users of avoidance schemes that have failed in the courts.1

Receiving a follower notice is a serious event, and a taxpayer would be unwise to ignore such a notice and not take the required 'corrective action' (ie essentially concede the dispute in HMRC's favour), unless they have received firm legal advice that the scheme or arrangement is strong enough to litigate further, as the penalty for losing is substantial (see below).

HMRC has published guidance on the follower notice provisions as well as a number of factsheets on the procedure2.

Scope of the follower notices legislation

The measure applies to income tax, capital gains tax, corporation tax (including amounts chargeable as or treated as corporation tax), the apprenticeship levy, inheritance tax, stamp duty land tax, annual tax on enveloped dwellings (ATED)3. Further taxes can be added to the measure by Treasury order4.

See A7.248C regarding the issue of a follower notice in respect of ATED5.


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