Hidenda Tax Ltd's judicial review against HMRC deemed academic

Hidenda Tax Ltd's judicial review against HMRC's decision deemed academic

In a recent ruling, Mr Justice Sheldon of the High Court of Justice, King's Bench Division, dismissed the judicial review proceedings brought by Hidenda Tax Limited against the Commissioners for His Majesty's Revenue and Customs (HMRC), deeming the case to be academic. The judgment was delivered on 12 March 2025, following a hearing that took place on 27 February 2025.

Hidenda Tax Limited, a company specialising in managing tax repayment claims from HMRC, initiated judicial review proceedings on 15 March 2023. The company challenged HMRC's decision to cease processing Marriage Allowance tax overpayment claims submitted by Hidenda before the specified date. The Court granted permission for Hidenda to proceed with one of the grounds for judicial review, while refusing permission for the remaining grounds.

During the substantive hearing on 27 February 2025, HMRC argued that the judicial review proceedings were academic and should be dismissed. Hidenda, on the other hand, contended that the application for judicial review should be considered and relief granted. Ultimately, Mr Justice Sheldon ruled that the proceedings were academic, promising to provide detailed reasons at a later date.

Background and Context

The case revolved around the Marriage Allowance scheme, introduced in April 2015, which enables a person to transfer a portion of their personal allowance to their spouse or civil partner under certain conditions, reducing their tax liability. Claims for Marriage Allowance can be made for the previous four tax years. Hidenda Tax Limited had a system in place where clients would submit Marriage Allowance claims to HMRC and simultaneously assign their claims to Hidenda using a form discussed with HMRC. Upon successful processing, HMRC would issue refunds to Hidenda, which would then distribute the payments to clients after deducting an agreed fee.

Between December 2021 and January 2023, HMRC processed over 2,362 claims using the form prepared by Hidenda. However, on 20 September 2022, HMRC initiated a review of Hidenda's assignment process. By 15 March 2023, HMRC concluded that the assignments were ineffective, stating that there was no statutory assignment and that the assignments were not made under the hand of the assignor, nor was there an assignment in equity. Consequently, HMRC informed Hidenda that it would cease processing its claims, which had already been paused since 23 November 2022.

The Legal Challenge

In response, Hidenda filed for judicial review on 15 March 2023, challenging HMRC's decision to halt the processing of the claims. Mr Christopher Joseland, representing Hidenda, argued that the decision was unjust, particularly as it applied to claims submitted before the policy change. On 14 May 2024, Mr Justice Sheldon granted Hidenda permission to proceed with Ground 4 of their application, while refusing permission for Grounds 1 to 3. Hidenda did not pursue the first three grounds further.

On 27 February 2025, the substantive hearing for Ground 4 took place. During the hearing, HMRC argued that the judicial review proceedings were academic, given that Hidenda had already resubmitted claims under a new nomination process, which HMRC was processing. Hidenda, however, resisted this assertion, urging the Court to consider the judicial review application and grant relief.

The Court's Decision

Mr Justice Sheldon ultimately ruled that the judicial review proceedings were academic, as the issues raised by Hidenda had been addressed by HMRC's new process for handling Marriage Allowance claims. He noted that HMRC had already processed a significant number of claims using Hidenda's form and had put in place a mechanism to address the issue of claims that had been paused. The judge concluded that there were no exceptional circumstances that warranted the continuation of the proceedings.

Mr Justice Sheldon acknowledged Hidenda's argument that some clients might still be eligible for refunds and that the company should be informed of the outcome of the processed claims. However, he concluded that HMRC's proposed mechanism to clear the backlog of paused claims within 5-6 weeks was sufficient to address the concerns raised by Hidenda.

Implications for Tax Practitioners

The judgment has significant implications for tax practitioners, particularly those involved in managing tax repayment claims. It underscores the necessity of ensuring that assignment processes comply with statutory requirements to avoid disruptions in claim processing. Additionally, the case highlights the importance of maintaining clear communication with HMRC and staying informed about policy changes that may impact the submission and processing of tax claims.

Learn More

For more information on tax-related legal compliance and best practices, see BeCivil's guide to English Data Protection Law.