M Sport Ltd, R (On the Application Of) v Her Majesty's Revenue And Customs

Where statutory machinery requires HMRC to consider representations against a follower notice or accelerated payment notice and decide whether to confirm, amend or withdraw it, that procedure is the taxpayer’s primary recourse and should normally be completed before judicial review proceedings are commenced. HMRC’s response supersedes the earlier notice and becomes the final decision open to challenge on any relevant grounds, including under the Human Rights Act 1998. Premature proceedings ordinarily preclude recovery of costs where they would have been unnecessary had the statutory procedure been awaited. Reasonable conduct, later withdrawal of the notices and imperfect pre-action correspondence do not by themselves justify a different costs order.

M Sport Ltd received a follower notice and an accelerated payment notice under Part 4 of the Finance Act 2014. It made statutory representations under sections 207 and 222 and threatened judicial review, but issued its claim before HMRC responded. HMRC later accepted that the follower notice was out of time under section 204(6) and withdrew both notices.

The claim was withdrawn by consent, leaving costs for determination. Upper Tribunal Judge Elizabeth Cooke, sitting as a judge of the High Court, made no order as to costs. M Sport appealed, challenging service of HMRC’s submissions, the application of the statutory procedure, the treatment of its human-rights grounds, pre-action conduct and the adequacy of the judge’s reasons. The central issue was whether the claim had been issued prematurely and, if so, whether costs should nevertheless be awarded.

Appeal dismissed. Richards LJ gave the judgment, with which Rose LJ and Popplewell LJ agreed.

1. The appellant failed to establish that HMRC’s costs submissions were late. Under CPR 6.26, service by first-class post was deemed to occur on the second day after posting. The date stamped by HMRC’s post room was better evidence of receipt than speculation about when the court had posted the order.
2. The representation machinery in the Finance Act 2014 is an integral part of the statutory scheme. Following R (Archer) v HMRC [2019] EWCA Civ 1021, [2019] 1 WLR 6355, a taxpayer should normally complete the procedure under sections 207 and 222 before commencing judicial review. HMRC’s response is the final decision open to challenge. The challenge is not confined to the grounds available for representations and may include human-rights grounds.
3. The three-month judicial review time limit does not require immediate proceedings while the statutory process is pending. The court may adopt a flexible and pragmatic approach to prevent prejudice. The guidance in Archer did not depend on an agreed extension of the original time limit; the relevant decision is normally the decision made after consideration of the representations.
4. The distinction drawn in R(M) v Croydon London Borough Council [2012] EWCA Civ 595, [2012] 1 WLR 2607, between different categories of settled judicial review claims did not need to be resolved. The prematurity of the proceedings was sufficient. The claim would have been unnecessary had the appellant waited for HMRC’s response, and that factor pre-empted arguments based on success, withdrawal of the notices or reasonable conduct.
5. HMRC’s pre-action response was not materially deficient. The appellant had not sent its letter in good time, and HMRC appropriately stated that the statutory grounds would be addressed through the representations procedure. The different circumstances in R (Cockayne) v HMRC [2016] Lexis Citation 706 did not create a conflict with Archer.
6. The judge’s brief reasons were sufficient when read with the written submissions and HMRC’s reply. Costs decisions need not be lengthy where the judge’s approach is apparent. The order making no order as to costs therefore stood.

1. Court of Appeal (Civil Division): Appeal dismissed. [2021] EWCA Civ 561.
2. High Court of Justice, Queen’s Bench Division, Administrative Court: Upper Tribunal Judge Elizabeth Cooke, sitting as a judge of the High Court, made no order as to costs on 22 January 2020 after the judicial review claim had been withdrawn by consent.