In a long-running dispute between catalogue company Littlewoods and HMRC about overpaid VAT and whether capital sums overpaid by a taxpayer should carry simple or compound interest, HMRC has lost the latest round at the Court of Appeal, reports Michael Steed
The case at the Court of Appeal, Littlewoods Ltd & Ors v R & C Commrs [2015] EWCA Civ 515, concerns the variance between UK law and EU rights over whether the company should have been reimbursed compound interest, potentially opening up a claim for up to £1bn, in a case which is likely to head to the Supreme Court,
Littlewoods had overpaid VAT between 1973 and 2004 of around £204m. This was repaid by HMRC, but only with simple interest allowed under VATA 1994, s78 of £268m.
Littlewoods claimed compound interest on the sum (of around £1bn) and this was denied by HMRC.
The case was referred to the European Court of Justice (ECJ) in 2012 which said it was for national courts to determine what sort of interest should be applied. The High Court ruled in Littlewoods favour in 2014 and HMRC appealed to the Court of Appeal, where its appeal was rejected.
