Taxman wins VAT battle for compound interest

An effort to force HM Revenue & Customs to pay compound interest on VAT
repayments has failed at the Court of Appeal.

The case was brought by a group of motor dealers. The court ruled the
dealers’ claim would not stand because it was outside of time limits. According
to Deloitte, the court also questioned whether there was an underlying right to
compound interest.

“This decision is perhaps not surprising, given the difficult time-limit
issues faced by the taxpayers in this case,” said David Raistrick, tax partner
at Deloitte. “However, this is certainly not the end of the compound interest
story as the decision expressly leaves a number of points open, which other
cases will need to address.”

Raistrick, added that the European Court of Justice would need to examine
whether a right to compound interest could be claimed.

He said: “Deloitte’s view remains unchanged, namely that a right to compound
interest does exist in principle, and taxpayers may still be able to obtain
compound interest via other avenues.”

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