IT contractors named in new high of judicial reviews

Contractors in the IT sector are among those named as having brought a record 90 applications to challenge the taxman via Judicial Review.

The yearly total is the highest on record and represents an increase from the 76 applications in 2015, and more than a doubling on the 42 applications in 2014.

Trying to fathom the increase, tax lawyers pointed out that more powers of a controversial nature being granted to HMRC have equated to more taxpayers feeling unfairly treated.

This is why judicial reviews exist -- so a court can decide whether the Revenue acted lawfully and fairly on a APN, or with a reclaim after it wrongly charged VAT, for example.

But the process of a judicial review is “complex” and can only be undertaken at the High Court, cautioned the lawyers of City-based firm RPC.

It said: “Many of the individuals that have challenged HMRC decisions through Judicial Reviews in recent times have been ‘ordinary taxpayers’ -- often contractors from sectors such as IT”.

The firm hinted that the nature of some of the additional powers HMRC has been given could also be contributing to the rising number of individuals and businesses who feel aggrieved.

Take APNs for example -- not only do these notices push for full upfront payment of disputed tax within 90 days, but they also provide the recipient with no right of appeal.

“HMRC has a duty to act fairly and lawfully, but more and more taxpayers are finding that it is falling short of the mark,” said RPC’s head of tax disputes Adam Craggs.

“With the new powers it has gained in the last few years, it is important that HMRC exercises its powers in a reasonable manner.”

However, Craggs indicated that a successful application for a judicial review -- whether in relation to an APN, a Conduct Notice or Taxpayer Residency, does not import fairness.

Citing comments by judges in a fresh judicial review, the dispute expert said HMRC was criticised for not cooperating fully by disclosing documents that might have undermined its case.

He added: “HMRC is also under intense political pressure to increase tax yield, which may also be contributing to the number of decisions that taxpayers are choosing to challenge through a Judicial Review.”

According to the 2016 figures, the amounts of tax in dispute in JRs lodged by contractors and other individuals are relatively modest, but larger corporates are also now increasingly challenging HMRC’s decisions by using the same proceedings.