Penalties and meaning of ‘reasonable in all circumstances’

The taxpayers had taken part in a tax planning scheme known as Working Wheels. HMRC issued follower notices to each of them under FA 2014 s 208. None took the corrective action required so HMRC imposed penalties. HMRC had mitigated the maximum penalty of 50% of the ‘denied advantage’ to 30%. This was designated a lead case.

The taxpayers said it was ‘reasonable in all the circumstances’ not to take corrective action because the follower notices contained errors.

The First-tier Tribunal found that all the errors were minor and could not justify the setting aside of the penalties. The judge said it could not have been parliament’s intention that a penalty could be set aside because a follower notice had stated ‘the First-tier Tribunal’s decision has not been appealed and is therefore final’ instead of ‘the Upper Tribunal refused permission to appeal the First-tier Tribunal’s decision and is therefore...