Letters from HMRC Counter Avoidance

A letter from HMRC’s Counter Avoidance directorate means HMRC thinks you have used, or may be using, arrangements it treats as tax avoidance. Letters range from an early warning with no legal deadline to statutory notices that carry penalties if you ignore them. Work out which type you have, note any deadline, and reply rather than wait.

What is HMRC Counter Avoidance?

Counter Avoidance is the part of HMRC that deals with marketed tax avoidance, the schemes sold to individuals and businesses, and the people who promote them. HMRC’s report on the use of marketed tax avoidance schemes is introduced by its Director of Counter Avoidance. The report describes “early intervention work” in which HMRC uses its data to identify people who might have entered avoidance schemes, alert them to the risks and help them leave as quickly as possible. It says the market is dominated by disguised remuneration schemes aimed at contractors and agency workers and largely operated through non compliant umbrella companies.

The same directorate runs the dedicated mailbox for people who want to leave a scheme, CAGetHelpOutOfTaxAvoidance@hmrc.gov.uk, and issues the statutory notices described below. A letter from it is not proof that you have done anything wrong, but it does mean HMRC has linked you to a particular arrangement.

Why might I receive a letter?

HMRC’s page on checking whether a letter is genuine says it writes to warn people of possible involvement in tax avoidance when its systems show they may be using, or have used, employment arrangements involving avoidance, and when it publishes information about avoidance arrangements and the people who supply and market them. The letter explains how to check your arrangements, the risks, and the support available. HMRC says it wants to raise concerns early so you do not build up a large tax bill, and that you must not ignore the letter.

Other triggers include an open enquiry into a return that relied on a scheme, a scheme reference number on your return, a court decision against a scheme similar to yours, or information HMRC has obtained from a promoter. HMRC’s report notes that a promoter given a stop notice must tell clients using the scheme about it and give HMRC details of current and previous users.

What are the common types of letter?

Letter	What it means	Deadline and response
Early warning about possible involvement in avoidance	HMRC’s data links you to an arrangement it has concerns about	No statutory deadline, but HMRC says not to ignore it. Check your pay arrangements and contact HMRC if you want to leave.
Compliance check or enquiry letter, often with factsheets	HMRC is formally checking a return that relied on the scheme	Reply by the date in the letter. Factsheet CC/FS7c is enclosed when HMRC is considering a penalty for a careless inaccuracy relating to avoidance.
Information notice	A formal demand for documents or information	Comply by the date in the notice or appeal where allowed. See Schedule 36 information notices.
Follower notice	A final court ruling in another case is relevant to your scheme	Take corrective action within 90 days of the notice, or make representations.
Accelerated payment notice or partner payment notice	You must pay the disputed tax up front while the dispute continues	Pay within 90 days, or make representations within that period.
GAAR counteraction notice	HMRC is using the general anti abuse rule to cancel the advantage	Follow the timetable in the notice. A GAAR penalty can apply.
Settlement letter	HMRC is offering terms to settle a scheme	Respond by any date given. The figures may include interest and penalties.

What do follower notices and accelerated payment notices require?

A follower notice can be given under section 204 of Finance Act 2014 when four conditions are met: an enquiry or appeal is open, your return, claim or appeal relies on a tax advantage from particular arrangements, HMRC considers a judicial ruling relevant to those arrangements, and no previous follower notice has been given for the same advantage, arrangements, ruling and period. It cannot be given more than 12 months after the later of the ruling and the date HMRC received the return or claim, or the appeal was made.

The corrective action under section 208 is to amend the return or claim, or take all necessary action to enter a written agreement relinquishing the advantage, and then tell HMRC you have done so and the amount of extra tax. The deadline is the end of 90 days from the notice or, if representations were made and rejected, the later of that date and 30 days after HMRC’s decision. Missing it brings a penalty of 30% of the denied advantage under section 209.

An accelerated payment notice can follow a follower notice, a DOTAS notifiable arrangement or a GAAR counteraction notice. Under section 223 the payment is a payment on account of the tax and is due within 90 days, or if you made representations, the later of that 90 days and 30 days after HMRC’s decision. HMRC says it writes some weeks before issuing one, that you may receive a separate notice for each year and each tax, and that late payment can bring penalties or surcharges and enforcement action. Our guide to accelerated payment notices and follower notices covers both in more depth.

Can I appeal?

Not against the notice itself. HMRC’s guidance says you cannot formally appeal against a follower notice or accelerated payment notice, but each notice explains what to do if you disagree. For an accelerated payment notice, HMRC says representations should be made in writing to the address on the notice, within the 90 days, if you think the amount is wrong or the conditions are not met. For a follower notice, representations can argue that conditions A, B or D are not met, that the ruling is not relevant to your arrangements, or that the notice arrived after the deadline for giving it.

You keep your right to appeal the underlying tax, and you can appeal any penalty charged for not complying with a notice. Paying an accelerated payment does not prevent the dispute continuing; if a tribunal or court later decides the scheme works, HMRC says it would normally repay the amount with any interest due.

How should I respond?

1. Check the letter is genuine using the contact details on HMRC’s list of genuine contact, and do not use numbers or links from a message you doubt.
2. Write down the date of the letter and every deadline in it. Statutory periods run from the date the notice is given, not the date you open it.
3. Identify the scheme, the years and the taxes. Find your contracts, payslips, loan statements and any DOTAS scheme reference number.
4. Get independent advice. Advice from the promoter or anyone paid to facilitate the scheme is “disqualified advice” and will not help show reasonable care for penalty purposes.
5. Reply in writing by the deadline, even if only to say you are gathering information and ask for more time.
6. If you want to leave the scheme, say so. Our guide to getting out of a tax avoidance scheme explains settlement.

What happens if I ignore it?

An early warning letter has no penalty of its own, but the tax position does not go away and interest keeps running. Ignoring a statutory notice is more serious: a 30% follower notice penalty that can only be reduced for cooperation to a minimum of 10%, late payment penalties and enforcement on an accelerated payment, and for GAAR cases arrangements entered into on or after 15 September 2016 a penalty of 60% of the counteracted advantage. HMRC also says that people involved in avoidance may be treated as high risk taxpayers, with all their tax affairs checked closely in future.

Illustration only. A nurse working through an umbrella company receives an early warning letter saying HMRC’s records suggest part of her pay is being paid as a loan. She checks her payslips, finds a second untaxed payment each month, moves to a compliant employer and emails HMRC. Because she acts quickly, only a few months of tax and interest are due, and she can ask to pay by instalments.

What mistakes do people make?

• Treating an early warning letter as junk mail because it has no deadline.
• Passing the letter to the umbrella company or promoter and relying on its reply.
• Assuming a scheme is safe because it has an SRN or is not on HMRC’s published list. HMRC does not approve any avoidance scheme.
• Making representations against an accelerated payment notice to the wrong address or after the 90 days.
• Thinking that paying an accelerated payment notice settles the matter. It does not cover interest or penalties.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

• Getting out of a tax avoidance scheme
• HMRC penalty explanation letters
• HMRC Spotlights and tax avoidance warnings
• Engagement letters for accountants
• The serial tax avoidance regime

Sources

• GOV.UK: Use of marketed tax avoidance schemes in the uk 2020 to 2021
• GOV.UK: Tax avoidance getting out of an avoidance scheme
• GOV.UK: Check if a letter youve received from hmrc is genuine
• GOV.UK: Compliance checks penalties for careless inaccuracies relating to tax
• legislation.gov.uk: Act 2014 c. 26, section 204
• legislation.gov.uk: Act 2014 c. 26, section 208
• legislation.gov.uk: Act 2014 c. 26, section 209
• legislation.gov.uk: Act 2014 c. 26, section 223
• GOV.UK: Follower notices and accelerated payments 2
• GOV.UK: Ten things about accelerated payment notices

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.