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Littlewoods gets verdict in High court VAT battle

Littlewoods has walked away victorious after a High Court dispute with HM Revenue and Customs, with the verdict costing the taxman over £1 billion.

The retail giant argued that HMRC should be forced to pay any compound interest on overpaid VAT made from 1973 to 2004. HMRC, up to this point, had paid only simple interest on refunds for overpayments, which came to a far smaller payment.

In spite of the simple interest on refunds being paid resulting in small payments, the High Court came to the conclusion that the retailer was in the right, which means that the taxman will have to pay a bill of £1.2billion.

The head of tax dispute resolution and indirect taxes at Eversheds, a multinational law firm, said:

“This is an important victory for taxpayers, but it is very likely that HMRC will seek permission to appeal to the Court of Appeal. In the meantime, relevant taxpayers will be entitled to rely on the judgment to get the enhanced interest payments, but they will have to repay the money if HMRC ultimately succeeds.”

HMRC has indeed said that it will be appealing the ruling, saying that the High court’s decision contradicts the intention of Parliament in terms of how the law related to VAT interest should work.

No matter the verdict of the appeal, this won’t just affect Littlewoods or other large companies, but businesses of all sizes. An accountant in Heswall will need to keep close eye on any overpayments received, just as an accountant for Littlewoods will, in order to avoid any unexpected bills.

Posted by Peter
April 10, 2014
Tax

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