Baxendale-Walker: HMRC’s tax avoidance crackdown

HMRC are issuing follower notices to participants in schemes involving ‘Remuneration Trusts’ that are not yet settled. In this article, Jess McLellan – Tax Risk & Dispute Resolution Partner at Wilson Wright, part of BKL since April 2024 – explains the background to HMRC’s crackdown, and how we can help if you or your clients are affected.


Following the First-tier Tribunal (FTT) decision on Northwood v HMRC ([2023] UKFTT 351 (TC), HMRC have started to issue follower notices to participants in schemes involving ‘Remuneration Trusts’ that are not yet settled.

These tax avoidance arrangements were mostly sold by Baxendale-Walker as well as a small number of other promoters. They involve the establishment of a trust for a class of beneficiaries that changed over time to sidestep UK anti-avoidance legislation.

A feature of the planning is that beneficiaries are often defined as those who have “provided finance” to the original company or unincorporated business and that funds are not generally retained in the trust, but are paid onwards to a fiduciary company controlled by the owners/directors of the original contributing business.

Follower notices direct participants of a scheme to settle their position with HMRC, in circumstances where HMRC consider the tax arrangements to have failed as a result of a decision in the courts or tribunals.  There is very little recourse to challenge a follower notice and significant penalties for not complying with settlement – such notices considerably increase the financial downside of continuing to dispute the position with HMRC.

The Northwood case

Northwood v HMRC considered the tax treatment of contributions to a Remuneration Trust established on the advice of Baxendale-Walker LLP. The FTT found that:

  • The payments to the remuneration trust did not give rise to an expense of the taxpayer’s unincorporated business under UK accounting standards
  • The payments (and related professional fees) were for the taxpayer’s personal benefit – they were not wholly and exclusively for the purposes of the taxpayers trade
  • The documentation relating to the remuneration trust was a sham

Whilst the majority of Tribunal decisions are specific to the facts of that case, there are a range of tax arrangements where similar structures have been used. Therefore it is likely that HMRC will look to apply the rationale adopted by the Tribunal in Northwood to force taxpayers to engage and settle legacy schemes.

For anyone who has participated in such arrangements, and not yet settled with HMRC, it’s important to be mindful of the decision and aware of the implications of receiving a follower notice from HMRC.

What are the implications of a follower notice?

The financial impact of receiving a follower notice can be significant: failure to comply could result in additional penalties of up to 50% of the disputed tax liability.  Together with the tax liability under dispute, and interest, this can have an unexpected impact on cashflow.

Whilst it is possible to make representations in respect of a follower notice, there is no right of appeal.

Generally, any representations made against the notice are likely to be rejected by HMRC. However, each arrangement is fact-specific and often HMRC have limited understanding of the fact pattern, the actual amounts involved and what the resulting tax liability should be.  So if you receive a follower notice, it’s imperative to seek specialist advice as soon as possible, understand your position in detail and engage with HMRC to mitigate the risk of additional tax and higher penalties.

How we can help

Wilson Wright’s specialists in tax disputes have acted on behalf of a number of scheme participants to settle Remuneration Trust arrangements with HMRC, and are familiar with the various nuances that need to be considered in concluding matters successfully.

For a confidential, no-obligation discussion on how we can help you or your client, please get in touch with your usual BKL contact or email Jessica McLellan at [email protected].



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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