Revenue and Customs Brief 5 (2017): final judgment in Littlewoods
Published 8 December 2017
© Crown copyright 2017
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1. Purpose of the brief
This brief explains the position of HM Revenue and Customs (HMRC) following the Supreme Court judgment in Littlewoods Limited and others handed down on 1 November 2017.
This withdraws previous Revenue and Customs Briefs 9/2015 and 20/2014 issued about this litigation.
The Supreme Court found in favour of HMRC, ruling that the statutory interest paid to the claimants is adequate and it isn’t necessary for compound interest to be paid.
The case is now final.
HMRC will invite claimants to withdraw their claims and any related appeals to the Tribunal.
2. Background
Littlewoods Limited and others claimed a refund of overpaid VAT for commissions on mail order sales. This VAT was repaid together with simple interest due under VAT Act 1994. They then argued that the interest already paid to them was inadequate and that they were entitled to compound interest both as a matter of EU law and also as a matter of English domestic law.
HMRC’s view has always been that there’s no community law right or domestic law right to compound interest and that section 78 of VAT Act 1994 provides an exhaustive statutory scheme by which only simple interest is payable.
The Supreme Court heard the case in July 2017 and released its unanimous judgment in HMRC’s favour on 1 November 2017. This means that statutory interest is sufficient to comply with EU law.
The Court confirmed that the statutory VAT regime provides an exhaustive remedy for overpaid VAT and is compatible with principles of EU law.
The Court determined that simple interest at statutory rates is sufficient to vindicate the EU law right to an adequate indemnity.
3. HMRC’s position
This litigation is now final.
Claims for compound interest on overpaid VAT or for any compensatory amounts other than simple interest under the provisions of the VAT Act 1994 will not be paid. HMRC will invite claimants to withdraw their claims and any related appeals to the Tribunal.
There are a number of claims where the underlying tax litigation is not yet final. Those underlying issues should now proceed.