VAT News

Overpaid VAT? Are you entitled to compound interest?


If so the latest decision in Littlewoods Retail Ltd may mean more interest to be paid by HMRC. The Court of Appeal decision in Littlewoods Retail Ltd in favour of the taxpayer is the most recent over the nine year history of compound interest cases and is good news for taxpayers and is potentially significant for all taxpayers with VAT repayments paid or due from HMRC. See link to case here

 The key points from the decision are that:

  • UK VAT law excludes restitutionary claims for interest and only allows the payment of simple interest
  • This exclusion is contrary to EU law on the basis that an ‘adequate indemnity’ is required, and it is wrong to say that interest of any kind will satisfy that requirement.  That does not mean that compound interest always has to be paid but it is more likely to be an ‘appropriate remedy’ to reflect the ‘use value’.  

This is not the end of this long running litigation and the advice is for taxpayers with existing High Court and Tribunal claims/appeals to maintain them until the matter is finally resolved and so at this stage no further action should be necessary.  

It seems very likely that permission will be sought (and granted) for the case to be appealed to the Supreme Court.  Therefore taxpayers with existing claims for compound interest should not expect to be paid any time soon.  

If you believe you have overpaid VAT but have yet to lodge any form of claim for compound interest please give us a call and we would be happy to discuss.

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