In R (oao Phoenix Life Holdings Ltd and others) v HMRC [2019] EWHC 2043 (Admin), the High Court has quashed HMRC’s decision to refuse a claim for repayment of under-recovered input VAT.


The claimants are members of the Phoenix Group of companies, which was known as the Pearl

Group until it was renamed in 2010. The claimants applied for judicial review of the decision of HMRC, made on 9 November 2017 (the Decision), upholding HMRC’s rejection of a claim made on 9 November 2007 (the Claim) by the second claimant (Pearl) and the fourth claimant (PGSL).

The Claim was for repayment of significant amounts of under-recovered VAT input tax paid by

Pearl in the period 1973 to 1997 (the Claim Period). Pearl was the representative member of the

VAT group with registration number (VRN) 234 9868 22 (the 234 VAT Group) throughout the Claim Period and submitted VAT returns in that capacity. HMRC accepted that £6,999,207 was under-recovered by Pearl on those returns. In 2003 PGSL replaced Pearl as the representative member of the 234 VAT Group.

Pearl and PGSL both left the 234 VAT Group in April 2005 and joined a newly formed VAT group numbered 860 2114 63 (the 860 VAT Group), PGSL becoming the representative member. When the Claim was made it was made by both Pearl and PGSL.

On 30 April 2008, the 860 VAT Group was dissolved, Pearl joining VAT group 369 4465 10 (the 369 VAT Group), of which the third claimant, Pearl Group Management Services Ltd (PGMS) was and remains the representative member. From that date, the Claim was pursued in the name of PGMS.

The Claim was submitted in advance of 31 March 2009, the date by which such claims (known as Fleming claims) were required to be made pursuant to section 121, Finance Act 2008. However, it was not until 2012, that HMRC objected that PGMS was not the correct claimant, and not until December 2013, that HMRC explained that none of the Phoenix group had a valid claim as (i) the right to repayment belonged to the 234 VAT Group, through its representative member at the time the Claim was made; (ii) Pearl had ceased to be the representative member of the 234 VAT Group by the time the Claim was made and (iii) any claim by or on behalf of the correct company would be out of time.

The alleged issue arose because, in December 2004, the Pearl Group and its life assurance business, then part of the Henderson group of companies, had been sold to new owners, thereby separating the two groups. In March 2005, following completion of the sale, Henderson Administration Ltd (HAL) had become the representative member of the 234 VAT Group and, about one month later, Pearl ceased to be a member of that group, joining the 860 VAT Group. HMRC asserted in 2013 that HAL (and not Pearl or PGSL) was the correct claimant when the Claim was made in 2007, as HAL was then the representative member of the group which had the Claim.

Pearl argued that the entitlement to claim the repayment of VAT was retained by it pursuant to the terms of the 2004 sale, so PGSL was entitled to claim as the representative member of the VAT group of which Pearl was a member when the Claim was made. Further, the Henderson group had confirmed that any recovery of input tax relating to the period prior to 2004 was due to Pearl/Phoenix and not to HAL or any other member of the Henderson group, and that any payments due to HAL should be paid to the Phoenix group.

HMRC rejected the argument that it has (and should exercise) a discretion: (i) to permit Pearl’s claim for repayment of VAT Pearl under-recovered, to be made other than by the representative member of the 234 VAT Group; or (ii) to treat the Claim as having being made on behalf of HAL; or (iii) to allow HAL to claim out of time.

HMRC formally rejected the Claim on 24 July 2017. Following a review, HMRC made the Decision, upholding its earlier rejection of the Claim. The claimants applied to the High Court for judicial review of the Decision.

High Court judgment

Mr Justice Phillips quashed the Decision and ordered HMRC to pay the Claim.

Although none of the officers who dealt with the Claim following its receipt in 2007 recollected considering the question of whether the Claim was made by the correct claimant, on review of the available evidence, the Court concluded that HMRC had considered entitlement on a fully informed basis in or about 2008, and determined that the claimants had standing to make the Claim.

On this basis, and in a strongly-worded judgment, the High Court held that the Decision was a “total reversal of HMRC’s fully-informed determination” in 2008 not to object to the Claim. Such reversal was made at a time when the taxpayer could “no longer take the simple steps to reformulate and resubmit the claim (with the authority of HAL)” before the March 2009 deadline. The Court concluded that the belated reversal after the claim deadline had passed, without a change in circumstances or good reason, was unlawful and irrational given the “highest public standards” expected of HMRC. Further, the claimants had a legitimate expectation that if HMRC had appreciated such a readily solvable problem before the claim deadline, they would be notified promptly or the point would remain untaken. In the view of the Court, the Decision was “so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it”.


In arriving at its decision, the Court appears to have been heavily influenced by the fact that HMRC was aware, prior to the end of the limitation period in March 2009, that the Claim was not made by the representative member but nevertheless determined that no issue of entitlement would be raised and the Claim could be pursued, and only reversed its decision after the deadline had passed, and without any change in circumstances. In the circumstances, it is not surprising that the Court took such a dim view of HMRC’s conduct.

The judgment can be viewed here.