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Long road ahead for dealers’ VAT claims

The number of dealers joining a ‘class action’ for millions of pounds of compound interest on VAT repayments could total 1,500.

Trevor Jones Chartered Accountants said it represented 350 dealers in the original cases against HM Revenue & Customs, when claimants won back VAT and simple interest. Those 350 were only a quarter of all the dealers who took action through other accountancy firms.

All dealers planning a claim must register with the Group Litigation Order (GLO) by mid-September. Then a dealer group will be selected by Trevor Jones for a High Court test case in spring 2008.

If successful, the dealers could receive millions of pounds. However, Trevor Jones’ senior tax manager Liz Gallagher warns they may have to wait “years rather than months”.

Gallagher says: “We are encouraging dealers affected to join the GLO to share what will be considerable legal fees, and only those who do so will benefit from any award of damages.”

HMRC has refunded overpaid VAT to some dealers in the past few years. Caffyns received £3m in March 2007, Lookers got £15m in 2004 and Caledonia was refunded some £7m in 2003.

The issue now is whether they are entitled to damages of either simple interest (typically one percentage point under Bank of England base rate), or compound interest, likely to be four times as much.

Trevor Jones and McGrigors Solicitors argue European law entitles the dealers to the higher figure.

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