What is the purpose of a follower notice and other questions answered on HMRC’s new rules to improve the rate at which tax avoidance cases are resolved? David Whiscombe reports for Tax Journal.
What is the purpose of a follower notice?
In HMRC’s words, the new rules ‘are designed to
improve the rate at which tax avoidance cases are
resolved where the point at issue has, in HMRC’s
view, already been decided in another taxpayer’s
case’. Under the new regime, when HMRC has
secured a ruling in a court or tribunal case which
it considers would govern other open cases, it can
issue a follower notice (FN) in those cases.
What does HMRC need before it can issue a FN?
There are three main requirements:
First, there must be in existence an open tax
enquiry or an open appeal. A FN cannot be
used as a way to open a closed year or to raise
an enquiry out of time.
Second, that enquiry or appeal must involve
‘tax arrangements’ – that is, where one of the
main purposes of the arrangement is avoiding
or deferring tax. So a FN cannot be issued in a
purely technical dispute, even where a ruling
on an identical point is given by the courts.
And third, there must be a ‘judicial ruling’
which is ‘relevant’ to the open matter.