Dear Colleagues,

 

The latest episode in the saga in overpaid tax claims has been decided by the UK Supreme Court in Littlewoods v HMRC [2017] UKSC 70: https://www.supremecourt.uk/cases/docs/uksc-2015-0177-judgment.pdf.

 

There are two issues (one appealed by Littlewoods and the other by HMRC), and Littlewoods loses on both. The judgment for the Court is delivered by Lord Reed and Lord Hodge.

 

On the first point, the common law claim to interest was held to be barred by the relevant provisions of the Value Added Tax Act. There are some interesting observations on the interplay between common law and statute and the role of legislative intent.

 

On the second point, HMRC succeeds in appealing in respect of the approach taken by the lower courts to the judgment of the Court of Justice of the European Union in a reference in the relevant case: the Supreme Court holds that “an adequate indemnity” under EU is provided by simple as opposed to compound interest:

 

“70 In our view, there is no requirement in the CJEU’s jurisprudence that the value which the member state, by the award of interest, places on the use of money should make good in full the loss which a taxpayer has suffered by being kept out of his money.”

 

The Court’s view of the saga is perhaps well indicated by the penultimate paragraph:

 

[73] “Littlewoods have already recovered overpaid tax, and interest on that amount, going back several decades. The size of that recovery reflects a combination of circumstances which could not have occurred in most of the other EU member states: the retroactive nature of a major development of the common law by the courts, so as to allow for the first time the recovery of money paid under a mistake in law, and the inability of the legislature to respond to that development, under EU law, by retroactively altering the law of limitation so as to protect public finances. The resultant payment of interest cannot realistically be regarded as having deprived Littlewoods of an adequate indemnity, in the sense in which that expression should be interpreted.”

 

Best wishes,

James

 

 

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James Lee

Reader in English Law and PC Woo Research Fellow 2016-17

Director of Undergraduate Admissions and Scholarships

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Recently Published: Man Yip and James Lee, ‘The Commercialisation of Equity’ Legal Studies (Early View) http://onlinelibrary.wiley.com/doi/10.1111/lest.12167/full

 

James Lee, ‘The Judicial Individuality of Lord Sumption’ (2017) 40(2) University of New South Wales Law Journal 862 http://www.unswlawjournal.unsw.edu.au/sites/default/files/402_15.pdf