Should HMRC pay you compound interest on VAT repayments? The House of Lords is due to hear the case of Sempra Metals Ltd v HM Commissioners of Inland Revenue on 16 May which although concerned with advance corporation tax will, it is thought, also have implications for VAT repayments.
HMRC have always paid simple interest on tax repayments but “Community law requires full compensation for the loss of the use of money; and full compensation for the loss of the use of money requires that interest is compounded…”. Not my words but those of Chadwick LJ in the Court of Appeal. If HMRC lose their appeal in the Sempra case prepare to revisit old repayment claims. It may well be that you can make a supplementary claim for additional sums of interest.
Date: 10th May, 2007
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