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Corrado – Tribunal cancels follower notice penalties 

31 July 2019. Published by Adam Craggs, Partner

In Giulio Corrado v HMRC [2019] UKFTT 275 (TC), the First-tier Tribunal (FTT) has set aside a follower notice (FN) penalty as the taxpayer's failure to take corrective action in response to a FN was reasonable in all the circumstances.


Mr Corrado had participated in what was commonly known as the 'Working Wheels' tax avoidance scheme, the details of which are not important for the purpose of this blog.  

In December 2014, following the FTT's decision in Flanagan v HMRC [2014] UKFTT 175 (TC) (in which it was held that the scheme was ineffective), HMRC issued to Mr Corrado a FN and an Accelerated Payment Notice (APN), pursuant to sections 204 and 219, Finance Act 2004, respectively. 

Mr Corrado was required by the FN to take corrective action by completing a form confirming that the additional tax due and payable by him was £191,803.60. As the amount of tax due from him was only £16,580.29, Mr Corrado did not complete and return the form. 

In January 2015, HMRC confirmed that Mr Corrado was in fact only liable to pay £16,580.29, and this was paid by him before the penalty deadline in March 2015. 

HMRC issued a penalty to Mr Corrado in the sum of £57,541.08 for failing to “take corrective action” on receipt of the FN, pursuant to section 208, Finance Act 2014. 

Mr Corrado appealed against the penalty. 

FTT decision

The appeal was allowed. 

The following three issues were before the FTT:

1. whether Mr Corrado had taken corrective action;

2. if he had not, were his actions reasonable in all the circumstances; and 

3. if not, whether the penalty should be upheld in the original amount, increased or reduced. 

The first issue

Agreeing with the FTT's decision in Hutchinson v HMRC [2018] UKFTT 290, the FTT determined that Mr Corrado had not taken corrective action. In the view of the FTT, corrective action requires taxpayers to clearly communicate to HMRC that they will irrevocably give up their claim to the tax advantage. No such communications took place; the discussions between Mr Corrado and HMRC centred around the amount of tax Mr Corrado was liable to pay. 

The second issue

The FTT noted that it is important to consider all of the circumstances when deciding whether a taxpayer's actions were objectively reasonable, including their experience, other relevant attributes and the situation the taxpayer found himself in at the relevant time. The FTT concluded that it was reasonable for Mr Corrado to rely on his professional adviser to settle his dispute with HMRC. It was also reasonable for Mr Corrado not to return the relevant form to HMRC as the amount claimed was simply incorrect. The FTT concluded that, in all the circumstances, it was reasonable for Mr Corrado not to have realised that he had not taken the necessary corrective action.  

The third issue

Given the FTT's conclusion that Mr Corrado's actions were reasonable, it was unnecessary for the FTT to consider this issue. 


This decision is a timely reminder that on receipt of a FN, simply paying any additional tax due is not sufficient for the purpose of taking the corrective action required by section 208. Taxpayers who do not wish to challenge a FN must irrevocably give up their claim to the relevant tax advantage, either by amending their return to remove the claim or by settling their dispute on terms which relinquishes the tax advantage. 

Whether a taxpayer's failure to take the required corrective action is reasonable, is to be determined on an objective basis. Whilst there will be exceptions, it will normally be reasonable (as it was in this case) for a taxpayer to rely upon his or her professional adviser.

The decision can be viewed here