A tax dispute involving AXA that began before the iPhone existed has finally reached its conclusion. The UK Supreme Court has ruled against two insurers trying to recover tens of millions of pounds from HMRC over corporation tax paid on foreign dividends going back to the 1990s.
The judgment, handed down on 27 July, involved AXA Insurance UK plc and Guardian Royal Exchange Assurance plc, the latter absorbed into AXA's UK business decades ago. Their claims sat within a much larger piece of litigation: roughly 60 separate cases worth more than £68 million, all managed together under a group litigation order, or GLO, a court procedure designed to stop the same legal questions being argued out dozens of times over.
The dispute goes back to 2003, when AXA and other companies challenged HMRC (then the Inland Revenue) over UK tax rules that treated dividends from foreign portfolio shareholdings less favourably than dividends from UK companies. That discrimination was eventually confirmed to breach EU rules on free movement of capital, so on the core legal question, there was little left to argue about by the time the case reached the Supreme Court.
What was still in dispute was narrower, though the money at stake wasn't small. Guardian Royal Exchange wanted interest on advance corporation tax it had paid too early, arguing that a 2013 High Court ruling in a related case brought by Prudential had already settled its right to that remedy. AXA, separately, wanted the six-year time limit on bringing tax claims pushed back, on the basis that the same 2013 ruling had fixed the date from which that clock started running.
Both arguments rested on that single 2013 judgment. The trouble is that the law it relied on has since been dismantled. The House of Lords' 2007 decision in Sempra Metals, which allowed companies to claim compound interest on tax paid prematurely, was overturned by the Supreme Court in 2018 and again in 2021. Separately, a 2020 ruling in the long-running FII group litigation changed the rules on when the clock starts running for tax mistake claims, replacing a 2006 House of Lords test that had stood for well over a decade.
By the time AXA and Guardian Royal Exchange's claims were heard, the legal basis for Prudential's 2013 win no longer existed. HMRC argued that the two insurers shouldn't be allowed to benefit from a ruling that had since been shown to be wrong, and the Court of Appeal agreed in November 2024.
Lady Rose and Lord Richards, giving the lead judgment, accepted that GLOs exist precisely so that one test case can bind everyone else without endless re-litigation. But they held that judges retain a discretion under procedural rule CPR 19.23 to depart from that binding effect in rare cases, and that a full reversal of the underlying law by the Supreme Court itself was rare enough to justify it here.
Lord Leggatt, agreeing with the outcome, wrote separately to stress that this discretion should be used sparingly. A change in the law on its own shouldn't normally be enough to reopen a settled group case, he said, or old litigation could be picked apart indefinitely. What made the difference in this instance was that unwinding the point required no fresh argument at all: the correct legal position had already been fixed by the Supreme Court in other cases, so there was nothing left to relitigate.
Guardian Royal Exchange's compensation for the prematurely paid tax will now be worked out under the statutory formula in the Finance Act 2019, rather than the larger sum a common-law claim might have produced. AXA's claim over its older tax payments goes back to the High Court, where a judge will need to decide the date on which the company could reasonably have realised it had a valid claim. That date will determine how much of its historic tax bill can still be recovered.
