Dealers’ claims for compound interest took a move forward last week, with a win for Littlewoods at the Court of Appeal, said dealer performance specialist ASE.
The case considered the long running issue of whether compound rather than simple interest should have been received on overpayments of VAT.
This is a positive result for dealers who have lodged claims for compound interest in relation to VAT refunds on demonstrator vehicles.
However, the issue is unlikely to reach a definite conclusion in the short term as HMRC, due to amounts involved, have sought leave to appeal the case to the Supreme Court.
ASE’s tax director Michelle Malone said: “Although this is a step closer towards a successful resolution, matters in the courts could be lengthy and could still go either way with no automatic follow on from the Littlewoods case.”
The fact that dealers’ claims are lodged at the VAT tribunal, rather than in the courts, adds further complexity. Unless the Supreme Court makes a specific ruling on whether claims can also progress at tribunal, it is probable that further litigation will be required once the Littlewoods case has finally been resolved.
Sue Robinson, director of the National Franchised Dealers Association (NFDA), which represents franchised car and commercial vehicle retailers across the UK, said: “The decision in favour of Littlewoods challenges HMRC’s position of paying only simple interest, rather than compound interest on VAT refunds.
“Many dealers have submitted claims because of this case and so Littlewoods’ victory is very welcome.
“However, we are only at the beginning of a process that still has a long way to go. HMRC have appealed the decision, and the case is likely to end up before the Supreme Court.”