Permission Is Not Needed To Pursue Costs Where A Judicial Review Has Been Overtaken By Events

Where a judicial review claim has been overtaken by events, the prospect of recovering costs already incurred does not provide a freestanding basis for granting permission on otherwise academic grounds. A specific costs mechanism exists under M v Croydon principles.

High Court Administrative Court ruling on costs applications in academic judicial review claims with alternative remedies

LEVY V THE COMMISSIONER FOR HIS MAJESTY’S REVENUE AND CUSTOMS [2026] EWHC 1400 (Admin)

In R (Levy) v Commissioner for His Majesty’s Revenue and Customs [2026] EWHC 1400 (Admin), Fordham J rejected the proposition that permission for judicial review should be granted on academic grounds solely to enable recovery of costs already incurred in the proceedings. The claimant challenged section 28B(4)(a) notices under the Taxes Management Act 1970 arising from film partnership schemes, including grounds relating to removal of loan interest tax relief. After HMRC issued appealable section 28A notices on 16 January 2025, the claimant lodged a First-tier Tribunal appeal and conceded in his skeleton argument that an effective alternative remedy existed. He nonetheless argued that permission was necessary to enable recovery of costs incurred in the judicial review proceedings, suggesting the court should resolve the substantive merits of the loan interest grounds for that purpose alone. Fordham J held that permission for judicial review is not a prerequisite for pursuing a costs order where a claim has been overtaken by events. The applicable mechanism, derived from M v Croydon [2012] EWCA Civ 595 and addressed at paragraph 25.5.3 of the Administrative Court Judicial Review Guide 2025, had not been utilised by the claimant. Permission on all loan interest tax relief grounds was refused, and all costs questions were expressly reserved.
Link to full judgment

[12] I have been unpersuaded by the costs points. The judicial review Court will generally not grant permission for judicial review where a claim has become academic, as is explained in §6.3.4 of the JR Guide. It is not correct that permission for judicial review is needed for ventilating a question as to costs. Costs can be sought in judicial review proceedings, where a case is overtaken by events, applying the M v Croydon [2012] EWCA Civ 595 line of authorities: see the JR Guide at §25.5. If the Claimant considered that there was a clear-cut basis for inviting a costs order in relation to costs incurred in these judicial review proceedings, there was the mechanism open to him which has not been utilised: §25.5.3 of the JR Guide.

Citations

M v London Borough of Croydon [2012] EWCA Civ 595 This Court of Appeal authority sets out the approach to costs in judicial review proceedings that settle or are overtaken by events save as to costs; it is the mechanism Fordham J identified as the route for recovering costs without requiring permission for judicial review to be granted. Administrative Court Judicial Review Guide 2025 The official Administrative Court guidance published by the Courts and Tribunals Judiciary; the source for the costs mechanism at paragraphs 25.5 and 25.5.3, and the academic-claims principle at paragraph 6.3.4, relied on by Fordham J.
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Key Points

  • Where a judicial review claim has been overtaken by events, a claimant does not require permission for judicial review in order to pursue a costs order in respect of costs already incurred; the appropriate mechanism is an application under the M v Croydon [2012] EWCA Civ 595 line of authorities, addressed at paragraph 25.5 of the Administrative Court Judicial Review Guide. [12]
  • The prospect of recovering costs already incurred in judicial review proceedings does not provide a freestanding or sufficient basis for granting permission for judicial review on grounds that have otherwise become academic or are more appropriately pursued by way of an alternative statutory remedy; the court will generally decline permission on academic grounds notwithstanding any costs consequences for the claimant. [12]
  • Where a claimant considers there is a clear-cut basis for a costs order in judicial review proceedings that have been overtaken by events, the specific mechanism set out at paragraph 25.5.3 of the Administrative Court Judicial Review Guide is available and should be utilised; failure to do so is a relevant consideration when the court assesses how costs questions should be addressed. [12]

[12] "If the Claimant considered that there was a clear-cut basis for inviting a costs order in relation to costs incurred in these judicial review proceedings, there was the mechanism open to him which has not been utilised: §25.5.3 of the JR Guide. I am putting all questions as to costs and the mechanism for claiming them to one side. The only issue that I am deciding today is permission."

Key Findings In The Case

  • The court determined that the Claimant’s points regarding loan interest tax relief should be pursued in the First-tier Tribunal (FTT) as an adequate alternative remedy exists through the FTT appeal process, rather than through judicial review [10].
  • The court rejected the Claimant’s argument that judicial review permission was necessary for costs recovery purposes, reaffirming that judicial review should not be used to address costs when the case has been overtaken by events, and that the Claimant did not use the available mechanism under paragraph 25.5.3 of the Judicial Review Guide to address costs issues [12].
  • The court found that the judicial review was academic concerning the loan interest tax relief since appealable s.28A notices had been issued, providing the Claimant with an alternative remedy, rendering permission for judicial review unnecessary [11].
  • The court noted the Claimant had not utilised the specific mechanism available under paragraph 25.5.3 of the Administrative Court Judicial Review Guide to pursue costs, which the court viewed as a relevant consideration in assessing costs questions [12].
  • It was determined that the Claimant had no proper basis for seeking permission for judicial review on grounds related to loan interest tax relief, recognising that any potential costs issues could have been addressed through alternative procedures set out in the Judicial Review Guide [13].

[12] "There is some suggestion in the materials filed on behalf of the Claimant that the judicial review Court would not only grant permission but go on to resolve the legal rights and wrongs of issues relating to loan interest tax relief, all for the purposes of deciding who should pay costs incurred so far in these judicial review proceedings."

The Administrative Court’s decision in R (Levy) v Commissioner for His Majesty’s Revenue and Customs [2026] EWHC 1400 (Admin) concerned a permission application in judicial review proceedings challenging statutory notices issued by HMRC under section 28B(4)(a) of the Taxes Management Act 1970.

Background

The claimant challenged a series of statutory notices issued by HMRC on 17 May 2024 under section 28B(4)(a) of the Taxes Management Act 1970. The notices made consequential amendments to the claimant’s personal tax returns arising from amendments to partnership returns for six film partnership schemes. No statutory right of appeal arises from section 28B(4)(a) notices themselves, and judicial review is therefore the only available public law remedy in respect of such notices, as confirmed by the Court of Appeal in R (Amrolia) v HMRC [2020] EWCA Civ 488.

The section 28B(4)(a) notices made two categories of consequential amendment to the claimant’s personal tax returns. First, they removed loan interest tax relief under Part 8 Chapter 1 of the Income Tax Act 2007. Second, they added the claimant’s apportioned share of partnership income used to pay the loan (so-called dry tax), pursuant to section 609(1) of the Income Tax (Trading and Other Income) Act 2005.

The claimant commenced judicial review proceedings on 14 August 2024. Subsequently, and as had been foreshadowed in HMRC’s summary grounds of resistance filed on 27 September 2024, HMRC issued a series of section 28A(2)(b) notices against the claimant on 16 January 2025. Those notices repeated the removal of the loan interest tax relief but did not include any corresponding addition of the partnership income used to pay the loan, HMRC’s position being that it was statutorily precluded from doing so within the section 28A notices. The section 28A notices carried a statutory right of appeal to the First-tier Tribunal, and the claimant lodged a notice of appeal dated 29 July 2025.

The Permission Application

Six grounds for judicial review had been pleaded. Some related to the removal of loan interest tax relief; others related to the addition of the dry tax income. At the permission hearing, the claimant advanced two principal arguments in support of granting permission on the loan interest tax relief grounds, notwithstanding the existence of the FTT appeal as an adequate alternative remedy.

The first argument was that the section 28B(4)(a) notices remained extant and could be maintained by HMRC even if the claimant succeeded in the FTT appeal. Fordham J rejected this submission. HMRC had expressly confirmed that the FTT appeal would address the substantive issues raised in the judicial review proceedings, including the argument about purchasing a share in the partnership under section 398(2)(a) of the 2007 Act. The judge found it impossible to see a situation where HMRC would be able to maintain a position on the same legal point by reference to the parallel statutory notices if that point had been resolved against HMRC in the FTT proceedings.

The second argument advanced by the claimant was that permission for judicial review was necessary in order to enable recovery of costs incurred in the judicial review proceedings to date. There appeared to be a suggestion that the court should not only grant permission but should go on to resolve the substantive legal issues relating to loan interest tax relief, for the purpose of determining who should bear the costs already incurred.

Fordham J rejected this submission on two distinct grounds. First, the court confirmed that permission for judicial review is not a prerequisite for ventilating a question as to costs. Where a judicial review claim has been overtaken by events, costs can be sought by applying the principles in M v Croydon [2012] EWCA Civ 595. That line of authority, and the procedural mechanism it supports, is addressed at paragraph 25.5 of the Administrative Court Judicial Review Guide 2025. The court noted that the specific mechanism available to a claimant who considers there is a clear-cut basis for a costs order, set out at paragraph 25.5.3 of the Guide, had not been utilised by the claimant in this case.

Second, the court confirmed the well-established principle that the judicial review court will generally not grant permission where a claim has become academic, as explained at paragraph 6.3.4 of the Judicial Review Guide. The prospect of recovering costs already incurred does not provide a freestanding justification for granting permission on otherwise academic or alternative remedy grounds. The court was clear that it was not appropriate to proceed to determine substantive legal issues relating to loan interest tax relief solely for the purpose of resolving a costs dispute.

Fordham J expressly put all questions as to costs and the mechanism for claiming them to one side, confirming that the only issue being decided at the hearing was permission. The court noted that the hearing had been convened specifically to deal with the permission question and that its ambit had not been extended.

Permission Refused on Loan Interest Tax Relief Grounds

The court refused permission on all grounds relating to loan interest tax relief. The FTT appeal provided an adequate alternative remedy for the substantive issues, and the claim had in material respects become academic following the issue of the section 28A notices. The court declined to make any observations as to the viability of any point before the FTT on the claimant’s appeal. Fordham J noted the obvious risk that a claimant runs in seeking to interest the High Court in questions about the viability of legal arguments which will feature in an appeal: the High Court might say something about the viability of those arguments which may not promote the claimant’s position in that parallel forum.

Permission Granted on Section 612(2) Expenses Deduction

Permission was, however, granted on a narrow issue relating to the second component of the statutory section 28B(4)(a) notices: the inclusion of the dry tax and the taxable partnership income used to pay the loan. Insofar as the grounds challenged whether the dry tax income arises as taxable income at all under Part 5 Chapter 3 of the 2005 Act, that challenge was unarguable by reference to the Court of Appeal authority in Good v HMRC [2023] EWCA Civ 114 at paragraphs 80 to 81.

However, a specific and narrow point remained: whether an expenses deduction from the income arises under section 612(2) of the 2005 Act, by reason of the fees described in the Eclipse FTT judgment. In the context of the claimant’s £2.3 million contributions and the £11.6 million said to be at stake in his FTT appeal, the scale of the relevant expenses deduction, if applicable pursuant to section 612(2), would be worth £186,000. The claimant argued that the denial of an expenses deduction under section 612(2) was unlawful, unreasonable, or unfair.

HMRC submitted that beyond narrow parameters of demonstrable procedural unfairness, judicial review was unavailable to challenge the substance of the decision, including by reference to its reasonableness. HMRC’s position was that there is a fundamental distinction between the tax position of the partnership and the tax position of an individual partner. The partnership income used to pay the loan concerns the income of the partnership. Any section 612(2) expenses deduction is one which the partnership is entitled to make. Once the position of the partnership has been determined against the partnership, the consequences cascade down automatically to impact the individual partner. Once HMRC has issued the section 28B(2)(b) notice, the question is whether the partnership takes steps to challenge that notice by way of its statutory appeal. Where there is no appeal, or an appeal is withdrawn, HMRC’s decision becomes legally determinative for the substantive question as to the lawfulness or reasonableness of the application of section 612(2) to any expenses. In the present case, there had been a conclusive determination through the issuing of a statutory section 28B notice against all the relevant partnerships, and the decisions of those partnerships, through the nominated partner, was not to appeal on 27 March 2024.

Fordham J acknowledged these were powerful submissions which may well prevail, but held that they did not meet the modest threshold of arguability in judicial review for refusing permission. HMRC expressly accepted that judicial review is not necessarily excluded in its entirety when a statutory section 28B(4)(a) notice includes a component of this kind. The court was shown no authority which decisively established the legal correctness of HMRC’s position about the restricted availability of judicial review. It was arguable that it is open to a person in the claimant’s position to challenge the public law lawfulness of section 28B(4)(a) notices of this kind by judicial review, including the substance of the decision and its reasonableness, and that this recourse to law has not been excluded by the statutory scheme.

The court noted that the parallel FTT appeal route would not be dealing with this specific issue about the application of section 612(2) of the 2005 Act, and that it had been shown no decided case within all of the lines of authority about these film partnerships which addresses this point. While the court was sceptical as to whether any enhanced fact-based scrutiny of the kind referred to in BlackRock HoldCo 5 LLC v HMRC [2024] EWCA Civ 330 could be appropriate on judicial review, it had not been persuaded by HMRC that there was no properly arguable basis for the claimant saying that the reasoned conclusion communicated by HMRC to him on the section 612(2) expenses point in a letter dated 6 August 2025 was in its substance unlawful or unreasonable. Although the court was also sceptical about whether public law procedural unfairness could be made out by the claimant in the facts and circumstances of the present case, procedural unfairness was also an argument which crossed the modest threshold of judicial review arguability.

Outcome

Permission for judicial review was granted, limited to two narrow and focused questions. First, whether it is open to the judicial review court to consider the lawfulness, reasonableness and/or fairness of the non-application of a section 612(2) expenses deduction for the fees. Second, if so, whether the application of section 612(2) described in the HMRC letter dated 6 August 2025 was unlawful, unreasonable and/or unfair. In all other respects, permission for judicial review was refused.

The claimant was required to amend the judicial review grounds to remove all challenges that relate to loan interest tax relief and those that relate to income used to pay the loan, leaving only those challenges as relate to a deduction under section 612(2) for expenses.

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LEVY V HMRC [2026] EWHC 1400 (ADMIN) | FORDHAM J | JUDICIAL REVIEW | SECTION 28B(4)(A) TAXES MANAGEMENT ACT 1970 | PARTNERSHIP AMENDMENT NOTICES | HMRC | STATUTORY APPEAL RIGHTS | R (AMROLIA) V HMRC [2020] EWCA CIV 488 | UPHAM V HSBC UK BANK PLC [2024] EWHC 849 (COMM) | ECLIPSE FILM PARTNERS NO.35 LLP V HMRC | LOCKE V HMRC [2019] EWCA CIV 1909 | SAMARKAND FILM PARTNERSHIP V HMRC [2017] EWCA CIV 77 | GOOD V HMRC [2023] EWCA CIV 114 | FILM PARTNERSHIP SCHEMES | INCOME TAX ACT 2007 PART 8 CHAPTER 1 | INCOME TAX TRADING AND OTHER INCOME ACT 2005 SECTION 609(1) | DRY TAX | ADMINISTRATIVE COURT JUDICIAL REVIEW GUIDE 2025 | SECTION 612(2) INCOME TAX TRADING AND OTHER INCOME ACT 2005 | BLACKROCK HOLDCO 5 LLC V HMRC [2024] EWCA CIV 330 | FTT APPEAL | SUBSTANTIVE HEARING | PROCEDURAL UNFAIRNESS | TAX RELIEF | ECONOMIC SUBSTANCE