Although the figures themselves are relatively small, the trend has been steady for a number of year until the latest results.
There were 51 applications for a Judicial Review against HMRC in 2012 (the most recent date for which data are available) – up from 39 in 2011; 39 in 2010; 37 in 2009; and 39 in 2008.
Judicial Review is a legal procedure by which individuals and organisations can challenge what they see as unlawful or unreasonable decisions made by Government and other public bodies.
Law firm, Pinsent Masons' Head of Tax Jason Collins said: “Judicial Review is a remedy of last resort, so this significant jump in the number of applications shows just how contentious some of HMRC’s decisions have become.
“Although not all of these disputes will progress all the way to a full Judicial Review hearing, this surge in challenges reflects taxpayers’ reaction to the increasingly aggressive stance taken by HMRC to increase its tax take and clamp down on tax avoidance and evasion.
“The problem is that what HMRC sees as tax avoidance many businesses legitimately see as sensible business planning.
“With so much money now at stake as the Revenue tries to plug the tax gap and help reduce the deficit in the public finances, there’s far more incentive for taxpayers who feel they have not been treated fairly not to give up without a fight.”
Pinsent Masons says that Judicial Review is typically used to control 'unreasonable' behaviour such as a failure by HMRC to follow its own guidelines or going back on a ruling it has previously made.
For example, HMRC may issue guidance on how it will interpret and apply the law in given circumstances in order to provide greater certainty for taxpayers. There have been instances where HMRC subsequently appears to have changed its view of the law and its approach. In such cases taxpayers may need to bring a Judicial Review to require HMRC to keep to its word.
Other examples include complaints about HMRC’s internal processes, such as a recent case involving the successful challenge of HMRC’s withdrawal of a professional firm's tax 'agent' status without notice, meaning that the agent was immediately no longer able to file its clients' tax returns. The Court overturned the withdrawal on the basis that HMRC should have allowed the agent to make representations before taking any action.
Jason Collinssaid: “The Revenue needs to make very sure that it is absolutely clear and consistent in its guidance and its actions if it is to help taxpayers pay the right amount of tax on time. HMRC may be getting tougher but these figures suggest that taxpayers aren’t willing to be steamrollered.”
He also pointed out that a recent Government consultation on reform of the Judicial Review system which closed in November could potentially reduce scope for taxpayers to apply for Judicial Review to overturn perceived unfair treatment going forward, as it seeks to reduce the amount of time consuming and expensive cases being heard.
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Susie Hughes © Shout99 2014