Compound interest - update
We reported in our blog of 18 May 2009 that taxpayers may be entitled to payment of compound interest on VAT refunds made by HMRC. At that time, certain lead cases were in the pipeline.
A recent Upper Tax Tribunal decision has further considered this issue (John Wilkins (Motor Engineers) Ltd and Others).
The Court has ruled in favour of HMRC and decided that UK legislation does not oblige HMRC to pay compound interest. The Tribunal accepted that taxpayers had a right in principle to compound interest under EU law but that UK law should not be interpreted to do likewise. It ruled that instead taxpayers should seek compound interest from HMRC by a separate civil law claim for restitution.
Appeals to the Higher Courts are expected to be made.
Jane Stacey is a VATadviser and a Senior Manager at Mercer & Hole. The views given in this blog are personal to the author.
Date: 22nd September, 2009
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