Simple not compound

The first decision of the Upper Tribunal (Tax and Chancery Chamber) concerned five unrelated appellants all motor dealers. They were brought together at the First-tier Tribunal and several appeals by other traders have been stood over awaiting the decision in this case.

All the appellants had paid excess output tax on bonus payments made to them by motor manufacturers and on the sales of demonstrator vehicles.

HMRC accepted that the VAT treatment had been incorrect and that the appellants had overpaid tax from as early as 1973. They repaid the tax to the appellants along with simple interest on the capital sums.

The appellants argued that HMRC should have paid compound interest on the repayments relying in particular on the European Court of Justice’s ruling in Test Claimants in the FII Group Litigation v CIR (Case C-446/04) [2007] STC 326 the House of Lords...