Littlewoods Ltd & Ors v HM Revenue and Customs

Littlewoods Ltd & Ors v HM Revenue and Customs

Sections 78 and 80 VATA 1994 exclude common law restitution claims for repayment and interest as a matter of English law, but this exclusion violates EU law’s principle of effectiveness in the circumstances of this case, as simple interest does not provide an adequate indemnity for the loss occasioned by undue VAT payment. The statutory bars must be disapplied, allowing both Woolwich-type and mistake-based restitution claims. Quantum is to be measured by objective use value at government borrowing rates, with compound interest awarded, and interest continues to run on accrued interest until judgment.

Parties
Claimants/respondents/appellants: Littlewoods Limited and others; Defendants/appellants/respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
England and Wales
Judgment Date
21 May 2015
Procedural Posture
Civil Appeal / Court of Appeal Judgment
Outcome
Appeal dismissed; cross-appeal dismissed.
Legal Topics
VAT Overpayment, Interest on Tax Refunds, San Giorgio Rights, Principle of Effectiveness, Compound Interest, Statutory Exclusion of Common Law Claims, Limitation Periods, Procedural Autonomy, Adequate Indemnity
Tax Law Restitution European Union Law VAT Overpayment Interest on Tax Refunds San Giorgio Rights Principle of Effectiveness Compound Interest +4 more

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Parties

Littlewoods Limited and others

Claimants/respondents/appellants

The Commissioners for Her Majesty’s Revenue and Customs

Defendants/appellants/respondents

Procedural Posture

Civil Appeal / Court of Appeal Judgment

Legal Issues

  1. 1 Are Littlewoods’ restitution claims excluded by sections 78 and 80 of VATA 1994 as a matter of English law?
  2. 2 Is that exclusion contrary to EU law, specifically the principle of effectiveness?
  3. 3 If so, can sections 78 and 80 VATA 1994 be construed to conform with EU law or must they be disapplied?

Ratio Decidendi

Sections 78 and 80 VATA 1994 exclude common law restitution claims for repayment and interest as a matter of English law, but this exclusion violates EU law’s principle of effectiveness in the circumstances of this case, as simple interest does not provide an adequate indemnity for the loss occasioned by undue VAT payment. The statutory bars must be disapplied, allowing both Woolwich-type and mistake-based restitution claims. Quantum is to be measured by objective use value at government borrowing rates, with compound interest awarded, and interest continues to run on accrued interest until judgment.

Court Disposition

Appeal dismissed; cross-appeal dismissed.

Orders

  • Sections 78 and 80 VATA 1994 are disapplied to the extent necessary to allow restitutionary claims for interest.
  • Littlewoods entitled to restitution measured by objective use value at government borrowing rates, with compound interest.