Compound interest referral

The taxpayer groups of companies in both appeals carried on catalogue-based home shopping businesses. This entailed networks of agents who earned income on third party purchases.

Between 1973 and 2004 due to an error on the part of HM Customs & Excise 10% of that commission was treated as consideration for services provided by the agent to the taxpayer resulting in the taxpayer having to pay VAT on the amount.

In 2007 the taxpayer claimed compound interest on the overpayments but HMRC refused the claim.

Mr Justice Vos referred the case to the European Court of Justice for a decision as to whether VATA 1994 s 78 and s 80 were compatible with EU law.

However his provisional view was that the taxpayers’ appeals would fail for the...