The High Court delivered its judgment on 8 May 2009 in the VAT Interest Cars Group Litigation (“VIC GLO”) confirming that, for restitution claims for overpaid VAT based on Community Law, compound interest should be paid.

The VIC GLO, a group of motor vehicle dealers, were claiming repayment of overpaid VAT with simple interest pursuant to Section 78 of the VAT Act 1994 (“VATA”) and compound interest following the Sempra Metals case. The claims concerned the repayment of VAT incurred on the onward sale of demonstrator vehicles and on manufacturers’ bonuses. VAT incurred in these circumstances became reclaimable after the ECJ judgments following the ECJ judgments in EC Commission v Italian Republic [1997] STC 1062 and in Elida Gibbs Limited v Customs and Excise Commissioners [1997] QB 499, [1996] STC 1387. Those cases were decided in 1996 and 1997.

This judgment stands as a victory in the compound interest debate but also a cautionary tale for taxpayers in respect of the time limits for submitting overpayment claims as the test claimants were held to be timebarred and consequently their claims were dismissed.