There were 52 applications made in 2012, the most recent year for which figures are available, compared to just 39 in 2011.
Jason Collins, partner and head of the tax group at Pinsent Masons 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."
He added that 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 – and 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," he said.
In the area of tax, judicial review is typically used to challenge behaviour seen as 'unreasonable', such as a failure by HMRC to follow its own guidelines or where it is seen to have gone back on a ruling it has made.
Pinsent Masons said there are examples where HMRC has appeared to change its view of the law and its approach after publishing guidance stating that it will interpret and apply the law in a certain way in given circumstances. The judicial review process has also been used as a means of challenging HMRC's internal processes.
But Collins also noted that proposed changes to the judicial review system could potentially reduce the scope for taxpayers to begin this type of legal challenge going forward. A consultation aimed at reducing the number of time-consuming and expensive judicial reviews closed in November, and set out proposed modifications including reducing judicial review opportunities for those who do not have a direct interest in a particular case.
HMRC was forced to concede a humiliating defeat in June last year as it made an application to withdraw its case against a group of investors in the ROSIIP QROPS who had challenged HMRC’s earlier decision to delist the scheme and seek charges of up to 55% on their pensions. At the UK’s Royal Courts of Justice it was agreed that HMRC would pay all costs on an indemnity basis, in contrast to the more usual practice in a judicial review such as this for costs of up to 60% or 70% to be awarded in favour of the winning party.
