Constable VAT Consultancy LLP

The Upper Tribunal has issued its decision in the lead cases on the issue of the payment of compound interest where VAT is repaid to a taxpayer. HMRC argue that where a taxpayer receives a refund VAT Law only requires the payment of simple interest at the statutory rate; in these cases the taxpayers argued that they should have received compound interest.

The Tribunal ruled that although taxpayers had a right in principle to compound interest as a matter of EU law, UK statute does not oblige HMRC to pay compound interest on VAT repayments to taxpayers. A taxpayer seeking compound interest as commercial restitution would have to make this claim via a civil law claim in the High Court.

It is likely that these cases will be appealed and heard in the Court of Appeal where they may be joined with a case taken by a group of motor dealers seeking compound interest via a civil law claim, which was rejected by the High Court earlier this year on the grounds that the claims were out of time.