The Court of Appeal has upheld Henderson J’s judgment awarding Littlewoods restitution from HMRC of more than £1.2 billion (Henderson judgment).
Following overpayments of VAT dating back to 1973, HMRC had previously repaid the principal amounts with statutory interest. The claims were for the difference between that statutory interest and compound interest at rates reflecting the actual cost of government borrowing.
In March 2014 Henderson J gave judgment allowing Littlewoods’ claims in full. HMRC’s appeal of the central issues was heard by Arden, Patten and Floyd LLJ in March 2015.
The Court of Appeal agreed with Henderson J on all of the issues on which HMRC had appealed and consequently dismissed HMRC’s appeal. In particular, the Court of Appeal agreed that, where tax is overpaid contrary to EU law, it must, as a matter of EU law, be repaid with interest at a level that adequately compensates the taxpayer. Following Sempra Metals Limited v IRC [2008] 1 AC 561 this interest payment should usually be calculated on a compound basis and there was no reason, on the facts of this case, to depart from that measure. The Court of Appeal also agreed with Henderson J that the claimants were entitled to claim on the basis of their mistakes in making the original tax payments, with the consequence that the claims were not subject to any effective limitation period.
Laurence Rabinowitz QC, Steven Elliott and Maximilian Schlote represented Littlewoods. They are instructed by Jamie Maples at Weil Gotshal & Manges.
The full text of the judgment of the Court of Appeal is available here.