HMRC wins battle with Littlewoods over compound interest repayments

HMRC has won a partial victory in its legal battle with Littlewoods over
compound interest on VAT repayments.

The High Court ruled in favour of the taxman, who was seeking compound
interest on a VAT repayment of around £200m from Littlewoods. However, doubts
remained over several points and the court proposed referring several questions
to the European Court of Justice for clarification.

A July hearing will determine whether the questions will be refereed to the
ECJ, with the court then obliged to follow any rulings.

David Raistrick, senior indirect tax partner at Deloitte, said the proposed
referral was “a long-awaited development in the various compound interest

“While we would not expect the ECJ to give its ruling before late 2011 or
even 2012, it should help to shed valuable light on this highly important area
of tax law, in which, as the High Court has acknowledged, there are very large
sums at stake for taxpayers,” he added.

Related reading