UK: Littlewoods opinion not the end of the road for compound interest debates
20 January 2012
On January 12 2012, Advocate General Trestenjak’s Opinion in Case C-591/10 Littlewoods Retail Ltd and Others was published. This represents the next phase in the VAT compound interest journey. Should the Court of Justice of the European Union (CJEU) to follow the Advocate General’s Opinion in its judgment, it is very unlikely that this trip to Luxembourg will be the end of the road, argue Michael Anderson and Robert Waterson of Dorsey & Whitney.
Littlewoods is the lead VAT compound interest case, behind which virtually all other similar claims are stayed (one notable exception being Grattan Plc (No.2) v HMRC [2011] UKFTT 282 (TC), which has its own reference to the CJEU).
When overpayments of VAT are returned to a taxable person, they are only entitled to ‘simple’ interest under s.78 of the Value Added Tax Act 1994. Ultimately, the question for the UK courts, and the CJEU, is: does the limitation of s.78 to simple interest on repayments of VAT provide the taxable person with an effective remedy under EU law, where the directive did not require the relevant principal sum of VAT to be paid in the first place?
The facts of Littlewoods relate to the VAT treatment of commissions paid to Littlewoods' agents. It is common ground that the Revenue’s treatment of the agents’ commission payments had been...
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