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Businesses are unlikely to be entitled to billions of pounds in unpaid interest on overpaid VAT following the advocate general’s opinion in Littlewoods (C-591/10), the lead VAT compound interest case, according to a leading law firm.
The argument centred on whether or not compound or simple interest is due on the VAT repayments.
Legal advisers McGrigors said the European Court of Justice usually follows opinions given by the advocate general when coming to its own conclusions, meaning UK taxpayers will be entitled to only to simple interest.
Stuart Walsh, tax partner at McGrigors, said, ‘This is a significant blow to thousands of British businesses that are contesting VAT claims. The statutory rate of interest paid by HMRC is significantly lower than the base rate and calculated on a simple basis. Taking inflation into account, some taxpayers will have received just a fraction of what they are owed in real terms.’
