In David Benton, Steve Jackson, Paul Hudson v HMRC [2017] participants in tax schemes tried to bar HMRC from their penalty appeals on the basis that Follower Notices were invalid.
- The taxpayers had all taken part in the Working Wheels tax avoidance scheme.
- The FTT had previously ruled that the scheme did not work
- HMRC issued Follower Notices on the participants who failed to take the necessary corrective actions.
- HMRC issued penalties
- The taxpayers appealed on the basis that the Notices contained a gross and fundamental error: HMRC had accidently included the wrong date on the Notice and failed to state correctly the time limit within which HMRC could give a valid follower notice.
- The result the taxpayers claimed was that they are not actually Follower Notices within the meaning of the applicable legislation. This meant that HMRC had no reasonable prospect of collecting a penalty it should be barred from proceedings.
As the follower notice legislation is so new, the FTT looked at the legislation, the nature of the claimed defects in the notices and the outcomes. It also considered the case for barring HMRC and various authorities.
Without finding any real solution the FTT decides that it did ‘not want to create satellite litigation on this issue’ and concluded that all aspects of the appeal should be dealt with at a substantive hearing. The appeal was dismissed.
Comment
It is a highly unsatisfactory state of affairs that a modern tax authority cannot interpret its own new legislation and therefore allows a taxpayer to effectively highjack proceedings. The outcome was a sensible move by the FTT. There are a number of similar appeals on this issue…to be continued!
Links
David Benton, Steve Jackson, Paul Hudson v HMRC [2017]
