Claims for VAT overpaid due to HMRC “official error”

The long-running saga of whether taxpayers who have overpaid VAT due to mistakes made by HMRC, for example in interpreting the legislation to the taxpayer’s detriment, has just passed another milestone. The Court of Appeal has agreed with the High Court that the claim for compound interest made by Littlewoods plc should be met. 

Simple interest is paid in such cases but the Courts have ruled that for a claim for compound interest to succeed the taxpayer would need to demonstrate that this rate of interest and repayment is “not adequate” for the loss suffered. As substantial sums are involved it is very likely that HMRC, driven by the Treasury, will apply to the Supreme Court for the judgement of the Court of Appeal to be overturned. If the Supreme Court refuses HMRC’s application then the judgment in Littlewoods’ favour will stand. It is also likely that HMRC will publish further public guidance on this matter in the near future.

However, where any business has overpaid VAT because HMRC misled it and it was only awarded simple interest, then depending upon when that overpayment occurred and the sums involved, it is worth exploring whether a claim for compound interest could be made. 

If you believe your business is affected please speak with your usual Lubbock Fine contact or to Andrew Rimmer, Clare Munro or Phil Moss.