From Royal Assent of Finance Bill 2014 (expected within the next week) HMRC has a new weapon which challenges a taxpayer’s basic right to have its case heard by a Court.
This is by the introduction of “Follower Notices”. The new power allows HMRC to order one taxpayer to settle their dispute when, in HMRC’s view, a decision in another case is relevant to the issues in the first taxpayer’s case. Since taxpayer’s circumstances are unlikely to be identical to another’s, the question of which decisions are relevant involves difficult decisions on issues of interpretation and questions of fact. These are points that ought to be considered by the Court, not unilaterally by one of the parties to the litigation.
A Follower Notice gives the taxpayer 90 days to concede its dispute and pay HMRC’s estimate of the tax due. The taxpayer has only limited rights to challenge the notice, and even then any such challenge is considered by HMRC and not the Court.
If the taxpayer does not concede following HMRC’s issue of a Follower Notice, additional penalties are levied. These penalties not only significantly increase the amount which the taxpayer has at stake in the dispute but must be challenged separately.
It is clear that the changes intend to reduce the backlog of similar disputes. However, these new rules are completely one-sided and has created an environment for yet further litigation and acrimony.
Please contact Marcus if you would like to discuss this further.