UK courts to decide

Littlewoods and the taxpayer companies were catalogue-based home shopping businesses that involved agents who earned income on third party purchases.

Between 1973 and 2004 commission on third party purchases was treated incorrectly as consideration for services provided by the agent to Littlewoods.

Commission should have been treated as a discount against the consideration for past purchases. As a result the companies overpaid VAT and claimed for repayment under VATA 1994 s 80.

HMRC paid simple interest on the repayment. Littlewoods said compound interest should be paid and claimed sums amounting to about £1bn.

The High Court considered that Littlewoods’ claims should be dismissed but referred the matter to the European Court of Justice (ECJ) to confirm whether or not EU law required national law to provide for payment of compound interest.

The ECJ ruled that it was for national law to determine in compliance...