'Landmark' VAT interest ruling

A lawyer says a ruling by a High Court judge on a tax dispute involving retail group Littlewoods is a landmark.

Littlewoods and HMRC had argued at a High Court trial which started in London in October
Littlewoods and HMRC had argued at a High Court trial which started in London in October

Giles Salmond said Littlewoods had won a fight with HM Revenue and Customs (HMRC) over how much interest should be paid on a tax refund - after making a £1.2 billion claim.

And Mr Salmond, who works at law firm Eversheds and specialises in tax issues, said the ruling by Mr Justice Henderson could have significant implications.

"Littlewoods had overpaid VAT between 1973 and 2004 in relation to its home shopping business," said Mr Salmond.

"Littlewoods claimed that based on principles of EU law they were entitled to the compounded use value of money they had paid to HMRC as VAT.

"Mr Justice Henderson has upheld EU law principles and said that HMRC must pay an adequate indemnity for the loss resulting from the overpayments of VAT.

"Today's judgment means that HMRC will be liable to pay billions in interest to other taxpayers who have already claimed overpaid VAT going back to the early 70s but have only been paid simple interest based on a reduced average of bank base rates."

He added: "This is an important victory for taxpayers, but it is very likely that HMRC will seek permission to appeal to the Court of Appeal."

Littlewoods - owned by businessmen the Barclay brothers - and the HMRC had argued at a High Court trial which stared in London in October.

Mr Justice Henderson delivered a written ruling today.