Littlewoods Retail Ltd & Ors v HM Revenue & Customs

Littlewoods Retail Ltd & Ors v HM Revenue & Customs

EU law entitles taxpayers to an adequate indemnity for overpaid VAT, which requires payment of compound interest reflecting the use value of money to the government. Sections 78 and 80 of VATA 1994 must be disapplied to allow both Woolwich and mistake-based restitutionary claims. HMRC is barred by abuse of process from reopening liability. The quantum of restitution is to be measured by the objective use value of the overpaid tax, not limited to the actual benefit obtained by the government, and no deduction is to be made for hypothetical additional corporation tax.

Parties
Claimants: Littlewoods Retail Limited and Others; Defendants: The Commissioners for Her Majesty's Revenue & Customs
Jurisdiction
England and Wales
Judgment Date
28 March 2014
Procedural Posture
Civil (tax, Restitution) / High Court Judgment (chancery Division)
Outcome
Claims succeed in full; judgment for claimants.
Legal Topics
VAT Overpayment, Compound Interest, San Giorgio Principle, Mistake Based Restitution, Woolwich Claims, Abuse of Process, Issue Estoppel, Change of Position, Adequate Indemnity, Conforming Construction, Disapplication of Statute
Tax Law Restitution European Union Law VAT Overpayment Compound Interest San Giorgio Principle Mistake Based Restitution Woolwich Claims +6 more

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Parties

Littlewoods Retail Limited and Others

Claimants

The Commissioners for Her Majesty's Revenue & Customs

Defendants

Procedural Posture

Civil (tax, Restitution) / High Court Judgment (chancery Division)

Legal Issues

  1. 1 Whether HMRC is liable to pay compound interest on overpaid VAT under EU law
  2. 2 Whether sections 78 and 80 of VATA 1994 exclude common law restitutionary claims
  3. 3 Whether payment of simple interest provides an adequate indemnity under EU law

Ratio Decidendi

EU law entitles taxpayers to an adequate indemnity for overpaid VAT, which requires payment of compound interest reflecting the use value of money to the government. Sections 78 and 80 of VATA 1994 must be disapplied to allow both Woolwich and mistake-based restitutionary claims. HMRC is barred by abuse of process from reopening liability. The quantum of restitution is to be measured by the objective use value of the overpaid tax, not limited to the actual benefit obtained by the government, and no deduction is to be made for hypothetical additional corporation tax.

Court Disposition

Claims succeed in full; judgment for claimants.

Orders

  • Sections 78 and 80 of VATA 1994 disapplied to permit both Woolwich and mistake-based claims.
  • Claimants awarded compound interest on overpaid VAT, calculated by reference to government borrowing rates as per Professor Kay's methodology.