Littlewoods awarded 1.2 billion pounds tax refund

Littlewoods, part of the multi-brand retail group owned by the billionaire Barclay brothers, has been awarded a 1.2 billion pounds tax refund, after a landmark High Court ruling sided with the home shopping retailer during a long running legal dispute concerning interest on overpaid VAT.

On Friday, judge Justice Henderson ruled that the claims issued by the retailer "succeed in full", and ordered the UK HM Revenue & Customs to refund over 30 years of overpaid taxes. His principal findings stated that EU law requires HMRC to pay Littlewoods an "adequate indemnity" for the loss suffered by the over payments of VAT.

The claims case is thought to have significant implications as it takes into account the VAT interest's compounded value over a 30 year period of time.

A spokesperson for the Littlewoods Group companies commented on the ruling: "We welcome [the] High Court ruling handed down by Mr Justice Henderson, which confirms that the claims for compound interest 'succeed in full'. The judgment provides a clear and robust resolution to complex issues raised by English and European law."

"[The] ruling is the logical consequence of that historic overpayment"

"HMRC has previously confirmed that VAT was incorrectly collected from Littlewoods for almost thirty years, following a claim lodged before the company was acquired by the current shareholders in 2002. HMRC has also stated that it is every taxpayer's right to seek repayment of overpaid tax and VAT. [The] ruling is the logical consequence of that historic overpayment. The directors of the company are duty-bound to ensure that the company and its tens of thousands of current and former employees are not disadvantaged as a result of the overpayment of VAT."

The claim first arose from over payments of VAT made by companies in the Littlewoods group between 1973 and 2004. The overpaid VAT, which is said to be around 200 million pounds, was then repaid by HMRC during various stages between 2005 and 2008, together with simple interest.

Howeve

r, Littlewoods claimed that the simple interest paid back from the overpaid VAT was only equal to a fraction of the actual benefit which the government derived from retaining the overpaid VAT over a 41 year period, and claimed compound interest from HMRC for the loss of the use of the money over the time period.

Littlewoods first issued their claim in 2007 and the first phase of the High Court trial took place in April 2010. Later the case was adjourned for questions to be referred to the Court of Justice of the EU, which passed its judgment in July 2012. The High Court trial then resumed and concluded over three weeks in October and November 2013.

The HMRC has said that it intends to appeal the ruling of the legal fight, and the courts will now decide whether HMRC should be allowed permission to appeal the judgment. If the judgment is appealed, then the Court of Appeal will most likely give judgment by fall 2015 and any further appeals to the Supreme Court are unlikely to be resolved until late 2016.

"HMRC has indicated that they intend to apply for permission to appeal to the Court of Appeal, so the legal process remains ongoing and could continue for several more years. However should this claim ultimately be successful then it will be payable to the Littlewoods Group companies, all of which are subject to UK Corporation Tax, not direct to the shareholders. In these circumstances the net proceeds will be used for further investment for the benefit of all stakeholders," added the spokesperson for the Littlewoods Group.

The Barclays brothers, who are also the owners of Telegraph Media Group and five-star hotels such as the Ritz in London purchased Littlewoods for 750 million pounds from the Moores family in 2002.