Littlewoods £1.2BN Tax Refund

On July 3 the Supreme Court will hear an appeal brought by HMRC against Littlewoods, in the latest stage of its long-running dispute over interest payments on a tax refund dating back 30 years.

The FT reports that Littlewoods has already received a £204m refund from HMRC on VAT that was wrongly charged on commissions paid to its agents who distributed mail-order catalogues. It has also received £250m of simple interest on the VAT refund. However, the company contends it should have received £1.2bn of compound interest charged on the interest already earned.

Bill Dodwell of consultancy Deloitte said the case potentially had important consequences for claims by other companies:

“There are a lot of cases stacked behind this one.” 

Giles Salmond, a partner of Eversheds Sutherland said:

“If Littlewoods is successful, billions of pounds of interest will be payable to taxpayers in relation to various historic claims.” 

HMRC has estimated it would have to pay out as much as £55bn if it lost all the legal battles it is fighting with taxpayers.

However, HMRC has calculated it will only have to to pay out on a fraction of these cases. The provisions it has made for tax disputes total £5.9bn.

Tax does have to be taxing.

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HMRC vs Littlewoods

HMRC has lost a High Court case against retailer Littlewoods, and will have to pay Littlewoods £1.2BN in compound interest on VAT overpayments made by Littlewoods between 1973 and 2004.

Lawyer Giles Salmonds said the ruling by Mr Justice Henderson could have significant implications, because it takes into account the interest's increased (or compounded) value over the years. He is quoted by ITV:

"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.

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."

However, before those owed money rush off to make a claim, it is highly likely that HMRC will appeal the verdict. As per Mr Salmonds:

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

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"