Motor dealers set to appeal VAT ruling

The High Court ruled the group made claims for compound interest outside the
relevant time limits.

Despite this, the court also ruled that compound interest is payable by HM
Revenue and Customs on VAT repayments made to taxpayers if there is a serious
breach of European Community law, which could see a flood of similar cases being

Experts believe the case could be worth hundreds of millions of pounds in
interest on VAT refunds.

The group litigation order of motor dealerships, including FJ Chalke in
south-west England and AC Barnes Wokingham in Berkshire, took the case against
HMRC to court in an attempt to secure additional compound interest on VAT
relating to demonstrator cars. The claimants lost the case on the basis of time
limit restrictions but they are now expected to make a restitution claim in the
High Court under EU law.

Paddy Behan, VAT partner at Vantis, said: ‘It is quite possible that a higher
court could take a different view on when time began to run and, if so, the
taxpayers would have a good chance of success…we have not heard the last word on
compound interest.’

Mike Sheppard, VAT partner at Grant Thornton, said: ‘For some taxpayers, the
compound interest will increase significantly the repayment from HMRC, exceeding
the value of the tax itself.’

Tony McClenaghan, senior indirect tax partner at Deloitte, said it was a
landmark case.

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