Lack of corrective action was reasonable

HMRC sent the taxpayer a follower notice as a result of his participation in a marketed scheme involving the routing of earnings through Isle of Man partnerships and an Isle of Man trust. The First-tier Tribunal found the scheme to be ineffective in Huitson (TC4621).

The taxpayer had failed to take corrective action as required by the follower notice so HMRC imposed a penalty. The taxpayer appealed.

The First-tier Tribunal found first that the follower notice and penalties were correctly issued. However the taxpayer relied ‘almost entirely’ on his tax consultant leading him to believe that he had a ‘strong case to succeed’. The taxpayer also pointed out that HMRC’s actions were inconsistent and that it seemed confused for example about whether National Insurance should be included. These factors led him to believe that he did not need to take corrective action.

The tribunal agreed that...