What is an HMRC Follower Notice?
Follower notices can be issued to anyone who has been involved in a tax avoidance scheme. A tax avoidance scheme is one where it is reasonable to conclude that obtaining a ‘tax advantage’ was the main purpose, or one of the main purposes, of the arrangement entered into.
As with Accelerated Payment Notices, Follower Notices are intended to assist with HM & Revenue’s larger crackdown against tax avoidance. This article will help you understand what they are, and how to respond if you’ve received one.
What is a Follower Notice?
The follower notice is issued to improve the rate at which tax avoidance cases are resolved, where the point of issue has been decided in another tax avoidance case. That means when a judicial ruling is made by the court in a certain tax avoidance case, those involved in a similar scheme can be sent a follower notice asking them to settle their tax affairs with HM Revenue and Customs (HMRC). Failure to do so and the taxpayer could face a penalty of up to 50 percent of the tax in dispute.
What to do if you Receive a DOTAS Follower Notice?
If you receive a follower notice in relating to tax arrangements you have been involved in, that means a ruling has been made by the court that potentially resolves a number of tax avoidance cases, of which yours is one. A person who is regarded as a ‘follower’ i.e. someone who has used the same or a similar scheme, may then be sent a follower notice asking for their tax affairs to be settled. This will explain:
- What you need to do
- Why the notice has been sent to you
- What to do if you disagree
- What the relevant deadlines are
- What penalties might apply if you don’t pay
On receiving a follower notice, many ‘followers’ will agree to settle the disputed tax liability, but a few will not. Some choose to argue that small differences between the arrangements exist i.e. the ruling in court and the individual’s arrangements were not exactly the same. This leads to further litigation which can add months or years to the time taken to resolve the dispute. However, followers who do not settle their dispute put themselves at risk of a penalty.
Can you Appeal a Follower Notice?
If a taxpayer does wish to challenge a follower notice, it is a decision they should consider very carefully. Any taxpayer who decides to challenge HMRC in a tax scheme appeal must pay the amount in dispute upfront and face the threat of a further 50 percent penalty if their appeal is unsuccessful. For this reason, it is essential taxpayers seek specialist advice and carefully weigh up the pros and cons of an appeal before it is lodged.
If you have been sent a HMRC follower notice and wish to dispute the notice or simply discuss why it has been sent to you, please call our team confidentially on 08000 746 757 or send us an email at: [email protected].