TaxCorporate TaxTaxman escapes £1bn Littlewoods bill

Taxman escapes £1bn Littlewoods bill

VAT refund interest dispute between Littlewoods and HMRC is referred back to the UK courts by European Court of Justice

THE TAXMAN was spared a hefty bill after the European Court of Justice referred a VAT dispute between HMRC and high-street retailer Littlewoods back to the UK High Court.

The legal battle centred on whether refunds on VAT overpayments, made by Littlewoods between 1973 and 2004, should have been refunded with simple interest, or with compound interest where interest added to the original amount also earns interest.

Had the court ruled in Littlewoods‘ favour, HMRC would have faced a bill in the region of £1bn, with the door flung open to hundreds of similar claims.

The case will now come to back to the UK court, which many predict will favour the HMRC.

Lorraine Parkin, head of indirect tax at Grant Thornton, said: “The European Court of Justice’s decision means that Littlewoods, and other taxpayers with outstanding claims for compound interest, will have to hold their breath a little longer for the matter to be resolved – at least until the UK High Court makes a determination on whether other taxes provide more generous remedies.

“They can, however, take some encouragement from the fact that the European Court of Justice has not completely dismissed the notion of compound interest and has referred the matter back to the UK court.”

Stuart Walsh, partner at Pinsent Masons, added: “Relying on the principle of equivalence, the High Court will now conclude that HMRC need only pay interest in a way that is consistent with similar repayments across equivalent taxes.”

Related Articles

Watch out when winding up

Corporate Tax Watch out when winding up

1m Emma Rawson, ATT Technical Officer
How might Brexit affect UK tax policy?

Brexit & Economy How might Brexit affect UK tax policy?

1m Santhie Goundar
HMRC large business tax enquiry duration rises to 3 years

Corporate Tax HMRC large business tax enquiry duration rises to 3 years

4m Emma Smith, Managing Editor
‘Google tax’ nets HMRC £281m

Corporate Tax ‘Google tax’ nets HMRC £281m

8m Emma Smith, Managing Editor
OTS report: Corporation tax should follow accounts

Corporate Tax OTS report: Corporation tax should follow accounts

10m Alia Shoaib, Reporter
HMRC tax evasion assistance requests double in five years

Corporate Tax HMRC tax evasion assistance requests double in five years

11m Emma Smith, Managing Editor
Spring Budget 2017: Making Tax Digital

Business Regulation Spring Budget 2017: Making Tax Digital

1y Shereen Ali, Deputy Editor
Tax fraud loses HMRC £16bn

Corporate Tax Tax fraud loses HMRC £16bn

1y Emma Smith, Managing Editor