The small claims court sounds like a reasonable idea if all I can lose further is £25.
For the sake of balance, you should be aware that an unsuccessful county court claim could result in a loss of more than £25.
Assuming the claim is indeed defended, then there is also a 'hearing fee' for the claimant to pay in addition to the claim fee, which is also likely to be a further £25 [so £50 in total], and, if you did lose, you might be ordered to pay some or all of Northern Rail's costs, which could potentially run into three figures. All this would be in addition to your own costs (service of documents, travel, parking, time off work).
In general, though, with small claims, it is rare for the unsuccessful party to be ordered to pay all the winning party's costs unless the losing party has acted highly unreasonably.
If you won after a defended case, it is very likely that the claim fee and hearing fee would be added to the amount owed by Northern Rail, and you *might* be able to claim some additional costs, although I would not count on it.
It is also customary for a claimant to claim statutory interest on an alleged debt, (currently at a rate of 8%, I believe), but this must be added to the claim at the time of issue and worded in a very specific way. There are various online guides advising members of the public on how to bring such a claim.
For what it is worth, I tend to agree that a refund of the 'FPN' followed by prosecution would most probably be viewed as an 'abuse of process', but the question is whether this is a risk you are willing to take, or whether you are willing to wait six months to eliminate the possibility completely.
If you did go down this route, then it is all the more important to avoid any future situation in which Northern Rail, or any other TOC, could potentially accuse you of any offence, since they may (and probably would) then go straight to prosecution.
In general terms, I support PF schemes as an alternative to prosecution, but rather disapprove of Northern Rail's seeming attempt to introduce a quasi-PF scheme by the 'back door', at a higher rate, and without any of the usual safeguards associated with actual PF schemes.
TOCs are of course entitled to recover both the fare evaded and their reasonable administrative costs associated with the recovery process from offenders.
A £20, or even a £40 administration charge, could most probably be justified as a "reasonable pre-estimate of actual loss", even if it exceeds the actual loss in many individual cases. For comparison, failure to pay (or successfully appeal) a PF within the specified time period normally results in an administration charge of £20 being added to the amount due.
However, it is my belief that;
where a charge is openly described as a "fixed penalty";
is charged in addition to the fare;
is issued to (almost) all first time offenders for the same amount (plus fare) with little consideration for circumstances, and;
is issued at a rate of £80 even when the 'loss' and administration costs incurred by the TOC are absolutely minimal at the time of issue;
then it is unlikely to be justified on that basis.
However, Northern Rail would presumably seek to argue that the 'consideration' was dropping the prosecution, and that your payment constituted binding acceptance.
