The UK government may have to pay about £1.2bn to Littlewoods after a judge ruled in the company’s favour in a tax dispute dating back over 30 years.
The home-shopping company, owned by Sir David and Sir Frederick Barclay, won its claim to receive compound interest on improperly collected value-added tax.
It came after a decade-long legal fight that went to the European Court of Justice before being referred back to the UK in 2012.
“This is a very complicated case,” said Judge Launcelot Henderson in London, handing down a 163-page ruling, “with a huge amount of public money at stake.”
HM Revenue & Customs is facing separate lawsuits over improperly collected VAT that may prove costly for the British taxpayer.
“Today’s judgment means that HMRC will be liable to pay billions in interest to other taxpayers who have already claimed overpaid VAT going back to the early 70s, but have only been paid simple interest,” said Giles Salmond, a tax lawyer at Eversheds LLP, who wasn’t involved in the case.
Recall, the tax gap is the difference between the amount of tax that should have been paid and the amount that is paid. So, if there is tax that has been paid that should not have been then this shrinks the tax gap. And here we have an example of billions that have been paid which should not have been: thus the tax gap is smaller than before, by those billions.
No doubt we’ll see a little piece by Ritchie applauding this victory in the fight against tax abuse real soon now, eh?