I used to be flagged after a failed Tier 1 application.

Every time they had to investigate (and that's part of their job) even it will finally be 'ok'. At one day one friendly officer suggested that i can request for that flag to be removed, which he did.

No problem since then forever.

So - advice - be clear about the past situation (and maybe bring a copy of the letter); ask nicely to get the tag removed.