Corrective action after a follower notice

The taxpayer took part in a tax avoidance scheme known as ‘working wheels’ and claimed a repayment of about £256 694. Fully £40 000 of this loss was set against other income so the taxpayer obtained immediate relief but HMRC did not repay the balance and instead opened an enquiry into his return. It issued a follower notice (FN) requiring the taxpayer to take ‘corrective action’ and withdraw his claim arising from the disputed arrangement. For this purpose and as a convenience to taxpayers HMRC enclosed a form. He also received an accelerated payment notice (APN) which he paid.

However the taxpayer did not submit the corrective action form so HMRC issued a penalty of about 25% of the denied tax advantage (£64 162).

The taxpayer appealed. He said he had left the form to his advisers to deal with and he thought he had taken...