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Follower notice penalties cancelled as failure to take 'corrective action' was reasonable in all the circumstances

06 July 2022. Published by Keziah Mastin, Associate

In David Andreae v HMRC [2022] UKFTT 142 (TC), the First-tier Tribunal (FTT) allowed the taxpayer's appeal and cancelled penalties which HMRC had imposed for failure to take 'corrective action' following receipt of follower notices.


Mr Andreae worked as an IT contractor and following recommendations from colleagues he carried out some research into Montpelier Tax Consultants (Isle and Man) Ltd (Montpelier). He was satisfied that it was a reputable accountancy company and  he instructed Montpelier to take care of his tax affairs. 

Mr Andreae attended a presentation by Montpelier in 2014, following which he decided to implement a tax scheme which it promoted (the Montpellier scheme). Mr Andreae's accountants prepared and submitted his tax returns relying partly on the information provided by Montpelier.

HMRC opened and closed enquiries into certain of Mr Andreae's returns and issued discovery assessments in relation to earlier returns. In June 2015, HMRC also issued accelerated payment notices (APNs) and follower notices (FNs) in relation to all years that Mr Andreae had utilised the Montpelier scheme, but subsequently withdrew them.    

In September 2015, the FTT released its decision in Robert Huitson v HMRC [2015] UKFTT 0448 (TC), in which it found that the Montpellier scheme was ineffective. The taxpayer in that case sought to appeal the FTT's decision and in August 2016, the Upper Tribunal refused his application for an extension of time to apply for permission to appeal. 

HMRC again issued APNs and FNs to Mr Andreae, the latter requiring him to take 'corrective action' ie amend his returns in order to  counteract the denied tax advantage. Failure to take such counter action could render Mr Andreae liable to a penalty under section 308, Finance Act 214.

Mr Andreae understood from Montpellier that an application for permission to appeal to the Court of Appeal was still pending in the Huitson case at the time of the deadline stipulated in the FNs for taking corrective action. As a result of that understanding and because he felt that HMRC was bullying him, he decided not to take corrective action at that time. 

Mr Andreae became concerned after experiencing difficulties in obtaining further information from Montpelier and sought a second opinion. He subsequently carried out the necessary corrective action required by the FNs. In October 2018, HMRC issued notices of penalty assessments and Mr Andreae appealed them to the FTT.

FTT decision

The appeal was allowed.

The FTT found that, considering matters objectively, Mr Andreae had no reason to doubt the advice and assistance provided to him by Montpelier and had reason to doubt HMRC. The FTT also considered that it was understandable that Mr Andreae was unsure who to trust and who to consult when he started to become concerned about Montpelier.  The FTT also concluded that Mr Andreae was proactive in seeking advice, was responsive to HMRC, carried out his own research and acted promptly when he realised he needed to obtain a second opinion. It was therefore reasonable, in all the circumstances, for him to decide not to take corrective action before and after the relevant deadline stipulated in the FNs.


This decision confirms that reliance on advice received from a professional advisor can be sufficient to demonstrate that it was reasonable in all the circumstances not to take corrective action. However, in this case Mr Andreae had carried out his own careful research, kept records and acted promptly and proactively. Taxpayers who are less diligent than Mr Andreae may face difficulties in seeking to rely upon a similar argument.

The decision can be viewed here.