Trust Bloomberg Tax's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.
By Ben Stupples
The U.K. government won’t pay value-added tax claims worth 17 billion pounds ($22.6 billion) due to a Supreme Court ruling against a company owned by the billionaire Barclay brothers.
The Nov. 1 judgment from the U.K.’s highest court affects 5,000 claimants who have been waiting to learn whether home-shopping company Littlewoods will receive 1.3 billion pounds in interest payments on a VAT refund. The U.K. tax authority calculates that the claims relating to VAT refunds are worth 17 billion pounds, the judgment said.
The Supreme Court’s ruling is a significant blow to Littlewoods, a subsidiary of the Liverpool-based online retailer Shop Direct, which has fought to claim the tax refund for the past decade.
The Littlewoods case is “one of the largest tax disputes to go to court,” Dominic Stuttaford, London-based head of tax for Europe, Middle East, Asia and Brazil at law firm Norton Rose Fulbright, said in a Nov. 1 news release. The U.K.’s tax authority “will unsurprisingly be pleased” with the ruling.
The Littlewoods case focuses on the company, now based online after dropping its mail-order catalog in 2015, overpaying 205 million pounds VAT between 1973 and 2004.
Over the next four years, HMRC repaid Littlewoods the original amount plus 268 million pounds in interest. While Littlewoods didn’t dispute the VAT refund, it claimed that HMRC should also have paid 1.3 billion pounds in accumulated interest earned from the 268 million pounds.
Following hearings in 2010, a High Court judge referred the case to the European Court of Justice over the interpretation of EU law on the compensation a company should receive for overpaying VAT. In a July 2012 judgment, the ECJ said that Littlewoods is entitled to reimbursement, but that national law should determine what type of interest HMRC paid to the company.
In 2014 the High Court ruled in favor of Littlewoods. The Court of Appeal, the U.K.’s second-highest court, upheld the company’s right to receive the 1.3 billion pounds in compound interest in 2015. In turn, HMRC appealed that ruling to the Supreme Court, with the hearing held in July.
Jeremy Cape, a London-based tax partner at law firm Squire Patton Boggs, reacted to the Supreme Court ruling by highlighting the significance of the European Court of Justice’s verdict.
“This is a good example where ECJ jurisprudence could potentially have ended up overriding a U.K. statute and put a massive hole in the U.K.’s finances,” he told Bloomberg Tax Nov. 1.
In a Nov. 1 statement, a spokeswoman for Littlewoods told Bloomberg Tax the Supreme Court ruling is “disappointing” in light of the company’s previous success at both U.K. courts and the ECJ.
“Given the importance of the legal issues and the sums at stake, we felt a duty to pursue this to its ultimate conclusion,” she added. “To that end, today’s decision has provided legal certainty and we can now finally draw a line under this case.”
A spokesman for HMRC told Bloomberg Tax in a Nov. 1 emailed statement that the court ruling is a “great outcome” for the U.K. taxpayer, protecting billions of pounds for public services funding.
The 17 billion pounds’ worth of VAT claims mark close to 15 percent of the total 119.8 billion pounds that HMRC collected for the levy in the latest financial year, according to data compiled by Bloomberg Tax.
Founded in 1923, Littlewoods is controlled through Shop Direct Holdings Limited. Twin brothers Sir David and Sir Frederick Barclay—owners of The Telegraph newspaper and The Ritz hotel in London—control this holding company, according to Shop Direct’s latest Companies House filings.
The brothers, 83, have a combined fortune of 7.2 billion pounds, according to the Sunday Times Rich List 2017.
To contact the reporter on this story: Ben Stupples in London at firstname.lastname@example.org
To contact the editor responsible for this story: Penny Sukhraj at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)