Plan to adjust follower notice penalties

HMRC is consulting on proposed changes to penalties that may be charged to taxpayers who are issued follower notices as a result of using avoidance schemes.

The proposals would:

• reduce the penalty rate from 50% to 30% of the tax in dispute; and
• introduce a penalty of 20% for those who the tribunal decides acted unreasonably by continuing their litigation against HMRC’s decision.

Announcing the consultation in the House of Commons financial secretary to the Treasury Jesse Norman said the government understood the concerns that have been raised about follower notices but that it had not been possible to identify any effective means of providing greater judicial oversight of the regime ‘which would not re-introduce or even worsen the delays in settlement and payment of disputed tax which the regime was designed to address’. The government accepted that a better balance could be...