Henderson J has ruled that the Littlewoods group’s restitution claims against HMRC succeed in full. 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 a judgment handed down on 28 March 2014 Henderson J held that HMRC should pay the Littlewoods group an amount in excess of £1.2 billion.
The trial began before Vos J in 2010 but was interrupted so that a reference could be sent to the Court of Justice, which ruled in 2012. Following Vos J’s elevation to the Court of Appeal, the resumed trial was heard by Henderson J in October and November 2013.
On the central issue the court interpreted the decision of the Court of Justice to mean that where tax is overpaid contrary to EU law, it must be repaid with interest at a level that reflects the market value of the money. Following Sempra Metals Limited v IRC [2008] 1 AC 561, and as a matter of basic economics, this interest should usually be calculated on a compound basis. Because the statutory repayment scheme contained in the Value Added Tax Act 1994 only provides for simple interest at below market rates, the scheme needed to be disapplied to allow the claimants to bring common law restitution claims in the High Court. Henderson J held that the claimants were entitled to claim on the basis of their mistakes in making the original payments, with the consequence that the claims were not subject to any effective time limitation.
In a judgment that exceeds 160 pages Henderson J also considered a number of other important questions of EU law, of restitution and of tax law, as well as points concerning estoppel and abuse of process.
Laurence Rabinowitz QC and Steven Elliott have represented the Littlewoods group since the proceedings began in 2008 and Maximilian Schlote also represented it at the resumed trial. They are instructed by Jamie Maples at Weil Gotshal & Manges.
Full text of the judgment available here.