Late corrective action taken after receipt of follower notices

In their 2004-05 tax returns the taxpayers disclosed that they had taken part in a gilt strips scheme. HMRC considered the scheme was similar to the one in Berry v CRC [2011] STC 1057 for the purposes of FA 2014 s 205(3). It issued follower notices and accelerated payment notices. The deadline for corrective action in relation to the follower notices was 21 March 2016.

The taxpayers’ agent wrote to HMRC on 4 April 2016 stating that the they ‘no longer wished to pursue any argument with HMRC as to the merit of the arrangement’ and accepting the amendments to their tax returns. HMRC issued penalties because the corrective action was late. The taxpayers appealed.

The First-tier Tribunal said there were no clear submissions as to why it was reasonable for the taxpayers not to have taken necessary corrective action by the deadline other than it was because they...