Campaign group UK Uncut Legal Action claims the taxpayer lost £20 million ($31 million) when HM Revenue and Customs (HMRC) let investment bank Goldman Sachs write off part of its tax bill.
The group says HMRC acted illegally and is now asking judges to act.
Though HMRC admits it did make a mistake in allowing the deal to go through, it says it did not act illegally and will fight the charge.
It insists the taxpayer lost between £5 million and £8 million and has since changed the way it negotiates tax deals with large companies as a result.
Goldman Sachs was found to have avoided tax during the 1990s by routing bonus payments through a subsidiary in the British Virgin Islands. Due to this, the investment bank did not pay national insurance contributions.
HMRC came to an agreement with the company, but cited technical reasons as the reason it could not collect all the interest it was owed.
By Claire Archer