In Littlewoods2 the High Court (Mr Justice Henderson) ruled on 28 March 2014 that, in a mistake-based claim for overpaid VAT, an award computed by reference to simple interest (rather than compound interest) would not provide an effective EU-law compliant remedy, which requires the taxpayer to be adequately indemnified for the loss suffered by the taxpayer’s overpayment of VAT.
The Brief acknowledges that Littlewoods’ claim for additional interest succeeded in full. However, in HMRC’s view the finding was “ based on the ‘exceptional’ circumstances specific to the Littlewoods claimants. It does not provide a clear basis that could be applied to other claimants or a formula for doing so.”
HMRC has obtained permission to appeal the judgment to the Court of Appeal.
HMRC will therefore apply for claims for compound interest already lodged with the High Court or County Court to continue to be stayed pending the final determination of the Littlewoods litigation. HMRC’s position in relation to tribunal appeals remains that these should continue to be stood over until there has been a final determination as to the availability of compound interest.
New requests for compound interest will continue to be refused by HMRC. To read the Brief click here.
To read the High Court decision in Littlewoods click here.