Lunn & Ors, R (on the application of) v HM Revenue and Customs

Procedural fairness normally requires a person to have an opportunity to make representations before an administrative decision terminates a valuable professional status, particularly where serious allegations of misconduct are relied upon. Post-decision representations may sometimes suffice, but urgency must be assessed in the circumstances, including whether the decision-maker contributed to the urgency and whether less severe measures were available. Where termination is based on serious allegations affecting reputation and livelihood, fairness may also require adequate reasons identifying the substance of the case. Later disclosure of reasons may make quashing unnecessary on that ground, but it does not cure an unlawful failure to provide a prior hearing.

The claimants, who acted as authorised tax agents, sought judicial review of HMRC’s decision to stop dealing with them as agents or representatives for taxpayers. The decision followed HMRC investigations and a criminal investigation into suspected systematic fraud and serious deficiencies in tax returns prepared for clients.

By the hearing, the claim had narrowed to two grounds: failure to give the claimants an opportunity to make representations before termination, and failure to provide adequate reasons. The central questions were whether urgency justified taking the decision without prior representations and whether the reasons given were sufficient.

1. Prior representations. Fairness required CLAC to have an opportunity to make representations before HMRC decided to terminate its authorised-agent status. That status was commercially valuable, had enabled CLAC to build a substantial client base, and termination based on suspected systematic fraud was likely to damage its livelihood and reputation. The allegations relied upon were more extensive than those disclosed in the earlier correspondence and interviews, so CLAC had not been adequately informed of the case it had to meet.
2. Urgency. The filing deadline for tax returns and the need to protect clients did not justify dispensing with a prior hearing. HMRC could have issued a minded-to-terminate notice, informed clients of the position, and considered representations within a short period. The urgency had also been substantially contributed to by HMRC’s delay. Existing HMRC scrutiny of returns would have reduced any marginal additional risk to the revenue.
3. Legitimate expectation. CLAC had no legitimate expectation of a particular procedure. HMRC had neither an established practice nor made a specific promise concerning termination of authorised-agent status.
4. Reasons. Although there is no general duty to give reasons, fairness required reasons here because the decision had serious consequences and alleged systematic fraud affecting CLAC’s probity and integrity. The broad terms of the decision did not enable CLAC to understand or answer the case against it. Later disclosure supplied a full explanation, so no separate quashing order was warranted on the reasons ground alone.
5. Disposition. Permission to bring the judicial review was granted, the claim was allowed, the decision was quashed for unlawful procedural failure, and the matter was remitted to the Commissioners for reconsideration.

First-instance judicial review. The claim was allowed and the challenged decision was quashed and remitted to the Commissioners for reconsideration.