Sharp rise in taxpayer challenges to HMRC

30 July 2018

The Inland Revenue faces a 36% increase in judicial reviews over unfair tax demands.

Taxpayers challenged the Inland Revenue in 122 judicial reviews last year, according to legal consultancy RPC. It says HMRC faced 36% more judicial reviews in the High Court than the year before, when just 90 cases were brought against the Revenue. 

Taxpayers can challenge HMRC where they believe it has overstepped its authority or acted unfairly. RPC says the adoption of a more aggressive approach by HMRC may have led to the sharp increase.

This approach may be due to political targets and a need to increase tax revenues. But RPC warns that taking such a dogmatic approach leaves the Revenue more vulnerable to legal challenges.

Adam Craggs, partner at RPC, says: "HMRC’s increasing aggression means that judicial reviews are becoming far too common and are, all too often, the result of simple errors by HMRC and a dogged refusal to correct them."

But taxpayers should ensure they have a case if they challenge the Revenue, being sure to consider whether it has acted unfairly or beyond its powers. Tax can be confusing but is important to understand – many retirees, for example, have been over-taxed when they have come to take money out of their pensions.

Recent examples when these challenges have been launched include occasions when HMRC has issued ‘information request’ notices to taxpayers who are not within its jurisdiction; when it has made retrospective changes to the treatment of Customs Duty; and when it has not adhered to its guidance in relation to rules on residence and the national minimum wage.

Mr Craggs adds: "The substantial increase in challenges would suggest that taxpayers are not prepared to be treated unfairly by HMRC and are willing to challenge its decision and seek redress from the High Court.

"We have seen a number of cases in the latest 12 months where HMRC has withdrawn its decision once it became apparent that clients intended to issue judicial review proceedings. But it is regrettable that taxpayers are forced to take such action before HMRC acknowledges its mistakes and does the right thing."

This article was first published on our sister website Money Observer.

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