Hidenda Tax Ltd, R (on the application of) v The Commissioners for HMRC [2025] EWHC 551 (Admin)

[2025] EWHC 551 (Admin)Case No AC-2023-LON-001879
IN THE HIGH COURT OF JUSTICE
KING’S BENCH DIVISION
ADMINISTRATIVE COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 12 March 2025
Before
MR JUSTICE SHELDON
Between
The King on the application of Hidenda Tax LTDClaimantThe Commissioners for His Majesty’s Revenue and CustomsDefendants
Mr Christopher Joseland (authorised by the Claimant in accordance with CPR Part 39.6) for ClaimantMr Azeem Suterwalla (instructed by HMRC) for DefendantsHearing Hearing dates: 27 February 2025
Approved JudgmentThis judgment was handed down remotely at 10.30am on 12 March 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives..............................MR JUSTICE SHELDON
[1]The Claimant, Hidenda Tax Limited (“Hidenda”), specialises in the management of tax repayment claims from His Majesty’s Revenue and Customs (“HMRC”). A significant part of Hidenda’s business concerns the submission of Marriage Allowance tax overpayment claims to HMRC. On 15 March 2023, the Claimant issued judicial review proceedings challenging the decision of HMRC to cease processing claims that were submitted by Hidenda prior to that date. On 14 May 2024, I considered the application for permission to seek judicial review on the papers. I granted Hidenda permission to proceed with Ground 4, and refused permission with respect to Grounds 1 to 3. Hidenda did not seek to renew Grounds 1 to 3.[2]A substantive hearing to consider Ground 4 was listed for 27 February 2025. At that hearing, HMRC contended that the judicial review proceedings were academic and that I should dismiss the claim. Hidenda sought to resist that submission and invited the Court to consider the application for judicial review and to grant relief. At the conclusion of the hearing, I informed the parties that, in my judgment, the judicial review proceedings were academic and that I would provide my reasons at a later date. These are my reasons.

Factual Background

[3]Marriage Allowance is a scheme that allows a person to transfer a portion of their personal allowance to their husband, wife or civil partner if certain conditions are satisfied, thereby having the effect of reducing their tax. Marriage Allowance was introduced in April 2015 and an individual can give up the personal allowance for 2019/20 and subsequent tax years even if this was not done at the time. Claims can be made for the previous four tax years. Hidenda had an arrangement pursuant to which its clients submitted Marriage Allowance claims to HMRC and simultaneously assigned their claims to Hidenda, using a form that had been discussed with HMRC. After the processing of the claims, where the applicant was eligible for a refund, HMRC would issue refunds to Hidenda who would then make payments to its clients less an agreed fee. Between December 2021 and January 2023, HMRC had processed over 2362 claims using the form prepared by Hidenda.[4]HMRC carried out a review of Hidenda’s assignment process, informing Hidenda of this on 20 September 2022. On 15 March 2023, an official at HMRC wrote to Hidenda to say that the review had concluded and HMRC’s view was that the assignments were not effective: “There is no statutory assignment, as it is not made under the hand of the assignor”, and there was no assignment in equity. As a result, HMRC notified Hidenda that it would no longer process its claims. HMRC also explained that Hidenda’s claims had actually been paused since 23 November 2022 and apologised for not informing Hidenda of this sooner.[5]Hidenda challenged the decision of 15 March 2023 by way of judicial review. That decision was described by Hidenda in the Claim Form as:(i) The decision of HMRC dated 15 March 2023 (and confirmed by letter dated 11 April 2023) refusing to process outstanding Marriage Allowance overpayment claims that were submitted by Hidenda Tax Ltd ('Hidenda') (on an agreed Marriage Allowance Claim and Deed of Assignment Form) prior to a policy change by HMRC dated 15 March 2023 in relation to assignments and agents.(ii) The failure of HMRC to take any action to mitigate the losses of taxpayer clients of Hidenda, who submitted Marriage Allowance claims prior to 15 March 2023 on Forms which contained an assignment that was deemed valid prior to policy change.[6]Hidenda complained that(1) there had been a breach of a legitimate expectation that the claims would be processed;(2) HMRC had acted unreasonably in applying a policy change retrospectively to previously submitted claims;(3) the conduct of HMRC in refusing to process the outstanding claims was Wednesbury unreasonable; and(4) HMRC acted unreasonably in failing to take any action to mitigate the losses of taxpayer clients of Hidenda who had submitted claims before 15 March 2023.[7]At paragraph 51 of the Statement of Facts and Grounds, drafted by Counsel, Hidenda submitted that: “it was incumbent o[n] HMRC to act reasonably and in good faith. Should the 5000-6000 taxpayers who have been prejudiced by the conduct of HMRC be required to re-submit applications as nominations, they would lose 1 year of marriage allowance refund payments. It is submitted that reasonable action to mitigate these effects would include treatment of any resubmitted claims as having been made on the date of receipt of the original assignment forms”.[8]The relief sought by Hidenda included(a) an Order to compel HMRC to process the Marriage Allowance applications submitted by Hidenda prior to 15 March 2023; and(b) alternatively, an Order to compel HMRC to treat all such claims, if re-submitted, as having been made on the date of receipt of the original assignment forms. Hidenda also sought a declaration that HMRC had acted contrary to a legitimate expectation that it would process all valid claims made on the agreed Marriage Allowance application form until such time as HMRC’s practice or policy on assignments changed.[9]HMRC resisted the application for judicial review. With respect to Ground 4, HMRC contended in its Summary Grounds of Resistance that whilst the decision not to take steps to mitigate any losses suffered by taxpayers may seem “harsh”, that was not an irrational decision. It was further stated that HMRC’s decision was in part based on the position that taxpayers could seek a remedy against Hidenda, and that in June/July 2023 Hidenda resubmitted around 2,300 claims under the new nomination process and these were being considered by HMRC.[10]On 14 May 2024, I considered the application for permission to seek judicial review on the papers. I refused permission for Grounds 1 to 3. With respect to Ground 4, I stated that this ground was arguable, observing that:
“It was arguably irrational for HMRC not to put in place some mechanism for taxpayers to make their claims, given that they may well have relied on the HMRC’s past practice that the deed of assignment used by the Claimant would be accepted, as it had been in the past, and HMRC would (or should) arguably have been aware of this”
. Having granted permission on Ground 4, I gave the usual set of case management directions to the parties.[11]On 16 July 2024, HMRC lodged Detailed Grounds of Resistance. HMRC stated that it had taken steps to put in place a mechanism to address the observations in the permission decision and that, as a consequence, Hidenda’s claim was academic. Further, that HMRC was in the process of liaising with Hidenda to agree terms to bring the judicial review proceedings to a conclusion. If terms could not be agreed, HMRC invited the Court to dismiss the claim and make an order that Hidenda pay HMRC’s costs of defending the claim.[12]On 13 June 2024, HMRC had written to Hidenda explaining as follows: “3. HMRC has considered its position further and intends to take steps to mitigate the effect of its 15 March 2023 on taxpayers. HMRC’s position is that the only loss it envisages a taxpayer suffering in consequence of its March 2023 decision is that a certain portion of their marriage allowance overpayment claim may fall out of time, due to the length of time of their claim, made through Hidenda, having been paused. 4. HMRC proposes to address the afore-mentioned loss through the following steps:(a) It will start working on the paused claims prior to contacting the taxpayer (the taxpayer will be notified of the outcome once HMRC has processed the claim);(b) It will process the marriage allowance overpayment claim as per its normal guidelines and a claim which falls outside of the in-date years will be processed by a specialist team;(c) That specialist team will follow guidance - which will permit them to recognise the entirety of a claim that falls outside of the in-date years - and therefore the taxpayer will not suffer any loss;(d) For the avoidance of doubt, when HMRC “processes” the marriage allowance overpayment claim it will still be looking at three possible outcomes: (i) A repayment is due to the taxpayer; (ii) A repayment is not due to the taxpayer (this will only be as a result of the taxpayer’s ineligibility and not because of any conduct on the part of HMRC or Hidenda); and (iii) A repayment has already been claimed and paid (this may have been made by and paid to Hidenda, the taxpayer or another tax repayment agent). Should the taxpayer state they have not received the repayment, the claim will be investigated, HMRC will trace the cheque and see where the cheque has been directed to. The taxpayer will then have the opportunity to go through the complaints process should they believe they have suffered a loss. HMRC’s position is that they consider there are very few cases where this is likely to have happened.(e) Once HMRC has formed a view as to whether the taxpayer will receive a repayment, or is not due a repayment, the taxpayer will be informed in either event;(f) HMRC believes that this process will take approximately 5-6 weeks to clear the backlog of about 3,000 paused claims”.[13]On 18 November 2024, Robin Knowles J allowed Hidenda to rely on a witness statement made by their managing director, Lee Mellor. Mr Mellor addressed HMRC’s proposal to process the paused claims, stating that:
“6. The number of claims they propose to process doesn't tally with the number of claims Hidenda Tax Ltd submitted prior to March 2022 that remained outstanding. 7. HMRC doesn't say if they will process the claim from the claim form it was submitted on that would have included making Hidenda Tax Ltd the tax agent for the clients on the claim form meaning Hidenda Tax Ltd would be included in all correspondence sent by HMRC to the clients. 8. HMRC doesn't say who payment for Marriage Allowance will be made to where processing of the claim would mean it should be paid to Hidenda Tax Ltd with the client then being paid their refund with Hidenda Tax Ltd's fee removed. 9. HMRC doesn't offer any mechanism for Hidenda Tax Ltd to cross reference the claims that were submitted against those HMRC will process meaning there may be claims missed as HMRC have lost claims submitted historically by Hidenda Tax Ltd, Harwood Claims Management Ltd and other tax agents.”
[14]On 13 December 2024, Dominic Clark, a manager within HMRC’s Agent Compliance Team, provided a witness statement in which he stated that according to its records HMRC had received 2,329 claims from Hidenda which used the assignment process, were not processed due to the policy change that the assignment process was not valid; and were submitted prior to 15 March 2023. An additional and separate 360 “standalone (agent authority forms)” were also processed in the paused claim queue, and were processed at the same time, but these had no bearing on the proceedings: the judicial review proceedings were concerned with claims made using the assignment form. A further 29 deceased customer claims were also dealt with. In total, Mr Clark stated that 2,718 claims were paused and had been addressed via the mechanism that HMRC put in place.[15]In his witness statement, Mr Clark explained the distinction between a ‘nomination’ and an ‘assignment’. Where a nomination is completed, the individual taxpayer remains the person legally entitled to the repayment and may withdraw the nomination if they choose to do so. Where there is an assignment, the assignee becomes the person legally entitled to the repayment and this can only be cancelled with the agreement of both the person assigning the repayment and the person assigned to receive the repayment. Mr Clark emphasised that claims made under the nomination process were not part of the judicial review claim. This is clearly correct as the Claim Form and Statement of Facts and Grounds focuses on applications made for the tax refund using the assignment form produced by Hidenda, and the decision which was under challenge was that made by HMRC on 15 March 2023 and which focussed on the assignment form.[16]Shortly before the hearing of the judicial review claim, Hidenda sent to HMRC a spreadsheet containing details of Marriage Allowance claims which it says should have been processed by HMRC. Mr Joseland, who is an employee of Hidenda and was given permission by the Court to represent his employer pursuant to CPR Part 39.6, submitted that 4861 claims were outstanding. Some of these included claims that had been resubmitted by Hidenda after 15 March 2023, but would not include the oldest tax year which would have been the subject of a claim submitted before 15 March 2023. Further, Mr Joseland submitted that the information provided by HMRC did not enable Hidenda to verify which of its clients had received refunds, and did not enable Hidenda to understand the reason for the refusal of refunds in any particular case. It was accepted by Mr Joseland that some claims would legitimately fail on eligibility grounds, as the conditions for the Marriage Allowance claim were not satisfied.[17]At the hearing before me, Mr Suterwalla, counsel for HMRC, made it clear (stating that he was making an “open undertaking”) that HMRC was prepared to consider the spreadsheet provided by Hidenda and that those claims that had been submitted before 15 March 2023 which had not been processed would be processed by HMRC. HMRC would also work with Hidenda so that Hidenda could be informed of the outcome of the processing of claims.

Is the claim academic?

[18]It is well established that a claim is academic if “there is no longer a lis to be decided which will directly affect the rights and obligations of the parties”, and disputes which are academic should only be heard if “there is good reason in the public interest for doing so”: see R v Secretary of State for the Home Department, ex parte Salem [1999] 1 AC 450, per Lord Slynn at 456G-457B. This applies as much to appeals as to applications for judicial review at first instance: see R (Zoolife International Limited) v Secretary of State for the Environment, Food and Rural Affairs [2007] EWHC 2995 (Admin).[19]As explained by the Administrative Court Guide at 6.3.4.2 (referring to Zoolife at [36]):
“In exceptional circumstances, the Court may decide to proceed with a claim even though the outcome has become academic for the claimant. The Court may do so if, for example, a large number of similar cases exist or are anticipated, or at least some other similar cases exist or are anticipated and the decision will not be fact-sensitive.”
[20]Mr Joseland has submitted that the claim is not academic. Although HMRC says that a mechanism has been introduced, Mr Joseland contends that it is was not verifiable. Hidenda’s own records suggest that a large number of claims (4,861) remain unprocessed, and so until there has been a full breakdown of what has happened to the claims set out on the spreadsheet there remains a live issue. Although Mr Joseland could not point to any specific client of Hidenda who had not received a refund to which they were entitled, it was clear that some of the clients whose claims have not been processed would be eligible for refunds. Furthermore, Mr Joseland submitted that it was necessary for the Court to make a declaratory order which states that HMRC’s decision to stop processing the claims was unlawful. This was because HMRC should be held to account for its unlawful conduct.[21]I disagree. In my judgment, there is no longer a lis to be decided between the parties which will directly affect the rights and obligations of the parties and so the claim has been rendered academic.[22]The claim made by Hidenda under Ground 4 was that HMRC had acted unlawfully by failing to take any action to mitigate the losses of taxpayer clients of Hidenda who had submitted Marriage Allowance claims prior to 15 March 2023 on forms which contained an assignment that was deemed valid prior to the policy change. Without admitting liability, HMRC has taken action to mitigate the losses of such clients of Hidenda. Accordingly, whether or not Hidenda was correct on Ground 4, HMRC has subsequently taken steps to mitigate the losses to Hidenda’s clients. In other words, HMRC has now done what Hidenda complained had unlawfully not been done by HMRC on or about 15 March 2023.[23]As for the adequacy or appropriateness of the mechanism adopted by HMRC, HMRC has stated (by way of Mr Clark’s witness statement) that the process of considering the relevant claims has been addressed; and, in open Court, Mr Suterwalla has given an undertaking on behalf of HMRC that the spreadsheet of client claims provided by Hidenda will be reviewed by HMRC, that HMRC will process the claims and will make arrangements to inform Hidenda of the outcome of that processing. As a consequence, and taking at face value the undertaking given by HMRC in open Court, Hidenda has achieved the practical relief that it had sought by way of judicial review.[24]Furthermore, there are no other circumstances, let alone exceptional circumstances, that justify continuation of these proceedings. There is no question of statutory construction that requires determination by the Court and which may impact on other taxpayers. Further, there is no requirement for the Court to grant declaratory relief. First, it is notable that the declaratory relief sought by Hidenda in the Claim Form (see paragraph 8 above) related to the legitimate expectation claim which was refused permission, and not to Ground 4. Second, in any event, the decision taken by HMRC with respect to the assignment of Marriage Allowance claims is specific to those very particular circumstances, and is not of wider application to other policies or decisions taken by HMRC. No proper purpose would therefore be served by granting a declaration with respect to the failure to mitigate taxpayer losses especially where, as explained above, HMRC has taken steps already and has now undertaken in open Court to take steps to address the fundamental concern that lay behind Hidenda’s Ground 4.

Conclusion

[25]For the reasons set out above, therefore, I dismiss this application for judicial review.

Cited in 1 later judgment