Roy Baker v The Commissioners for HMRC
Decision date: 6 February 2024
Neutral citation: [2024] UKFTT 126 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This appeal concerned follower‑notice penalties issued to Roy Baker in respect of an Isle of Man scheme and whether it was reasonable in all the circumstances for him not to take corrective action by the relevant date. The Tribunal accepted Baker's evidence of reliance on his professional adviser and HMRC's repeated errors and vacillating position on Class 4 NICs, found his failure to act was objectively reasonable, and therefore cancelled the follower‑notice penalties. The Tribunal also held that, if a penalty were payable, HMRC had correctly calculated a 42% penalty rate after allowing cooperation credit.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
The judgment indicates that a taxpayer's reasonable reliance on a professional adviser, together with contemporaneous evidence of HMRC errors and inconsistent positions, may properly be considered among the "circumstances" making it reasonable not to take corrective action under section 214(3) FA 2014. It also indicates that only cooperation given up to the date of penalty assessment is relevant to any reduction under section 210, and that HMRC's method of apportioning cooperation credit can be accepted where it reflects the statutory framework.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal observed that administrative errors by HMRC, even if they do not invalidate the legal effect of follower notices, can nevertheless be relevant as factors shaping a taxpayer's state of mind when deciding whether to take corrective action. The decision also comments that, in some circumstances, it may be desirable (though not mandatory) for a taxpayer to await HMRC review before appealing follower‑notice penalties to the Tribunal.