Reasonable not to take corrective action in time

The taxpayer an IT contractor used a tax scheme promoted by Montpelier. His adviser submitted his tax returns relying in part on information provided by Montpelier.

After an enquiry HMRC issued discovery assessments against which the taxpayer appealed. Montpelier wrote to HMRC stating the assessments were invalid.

HMRC also issued accelerated payment notices but later withdrew them. However it continued to believe that the scheme did not work. As a result of the Court of Appeal’s decision in R Huitson v CRC [2011] STC 1860 which concerned a similar scheme HMRC sent follower notices to the taxpayer. He contacted Montpelier which assured him the notices were not lawful and that they would be making representations against them. He therefore took no corrective action but told HMRC he would instigate a judicial review challenge.

HMRC subsequently issued a surcharge because no corrective action had been...