Compound Interest Alert – May 2015

The Court of Appeal released its judgment in the case of Littlewoods last Thursday. This case relates to the argument that European law requires the payment  of compound interest by HMRC in cases where VAT was collected and paid to HMRC in error. The matter has been ongoing since 2007 (when Littlewoods first lodged claims at the High Court).

The Court of Appeal has upheld the earlier decision of the High Court in finding that simple interest is not adequate indemnity for losses incurred by incorrect over payments of VAT.  Littlewoods is the lead case on the matter of compound interest and many organisations who have received VAT refunds from HMRC, and simple interest payments, have appeals stood behind Littlewoods. In the period 1973 to 2004 Littlewoods overpaid £204 million in VAT to HMRC. HMRC repaid this sum, plus simple interest. Paragraph 2 of the Court of Appeal decision states that a compound interest payment of £1 billion has been sought by Littlewoods. It seems likely that in view of the considerable sums involved in this case, and potential wider ramifications, that HMRC will appeal this decision to the Supreme Court.

If your organisation has submitted High Court claims or lodged Tribunal appeals these should be maintained. There is unlikely to be any movement on this issue in the immediate future. If you would like to discuss or refresh existing claims, or seek to protect an organisation’s position with new claims to HMRC, please do not hesitate to contact CVC at any time.