Littlewoods Ltd and Others v Commissioners for Her Majesty’s Revenue and Customs: SC 1 Nov 2017

The appellants had overpaid under a mistake of law very substantial sums in VAT over several years. The excess had been repaid, but with simple interest and not compound interest, which the now claimed (together with other taxpayers amounting to 17 billion pounds).
Held: ‘Since the scheme created by section 78 is inconsistent with the availability of concurrent common law claims to interest, it must therefore be interpreted as impliedly excluding such claims. The reservation set out in section 78(1) must therefore be construed as referring only to statutory liabilities to pay interest. So construed, section 78 impliedly excludes the claims made by Littlewoods, as a matter of English law, and without reference to EU law.’
The CJEU has given member state courts a discretion to provide reasonable redress in the form of interest in addition to the mandatory repayment of any wrongly levied tax, interest and penalties. We have three reasons for this view. First, the structure of the CJEU’s judgment itself and its choice of words support this conclusion. Secondly, the practice of member states in awarding interest on wrongly levied tax provides the context of the CJEU’s judgment and suggests that the court was not being as radical as the courts below have held. Thirdly, prior and subsequent case law of the CJEU is consistent with this interpretation.
There is nothing in the prior or subsequent case law of the CJEU which militates against the interpretation of its judgment in this case. Consistently with the views expressed by the European Commission and the member state governments which submitted arguments to the court in this case, the CJEU has not required the payment of more than simple interest if the national legal order treats that as reasonable redress for the unavailability of the money and no issue of equivalence arises. The CJEU’s reliance on the principles of effectiveness and equivalence is wholly consistent with its jurisprudence that the questions of the rate and method of calculation of interest are matters for the internal legal order of a member state.
Littlewoods had 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.
Lord Reed, Lord Carnwath, Lord Hodge JJSC, Lord Neuberger of Abbotsbury and Lord Clarke of Stone-cum-Ebony
[2017] UKSC 70, [2018] AC 869, [2017] 3 WLR 1401, [2017] WLR(D) 744, [2018] 1 All ER 83, [2017] STC 2413, UKSC 2015/0178, UKSC 2015/0177
Bailii, Bailii Summary, WLRD, SC, SC Summary, SC Summary Video, SC 2017 07 03 am Video, SC 2017 07 03 pm Video, SC 2017 07 04 am Video, SC 2017 07 04 pm Video
Value Added Tax Act 1994 94
England and Wales
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The society had set out to assert that regulations were unlawful in creating a double taxation. It paid money on account of the tax demanded. It won and recovered the sums paid, but the revenue refused to pay any interest accrued on the sums paid. . .
CitedRewe-Zentralfinanz eG v Landwirtschaftskammer fur das Saarland (Judgment) ECJ 16-Dec-1976
‘the right of individuals to rely on the directly effective provisions of the Treaty before national courts is only a minimum guarantee and is not sufficient in itself to ensure the full and complete implementation of the Treaty’ . .
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The tax payer had overpaid Advance Corporation Tax under an error of law. It sought repayment. The revenue contended that the claim was time barred.
Held: The claim was in restitution, and the limitation period began to run from the date when . .
At ChDThe Test Claimants In The FII Group Litigation v The Commissioners of Inland Revenue and Another ChD 14-Oct-2015
. .
Appeal from (CA)Littlewoods Ltd and Others v HM Revenue and Customs CA 21-May-2015
The company sought repayment by way of restitution for overpaid taxes. The tax had been repaid, but only as simple interest, and not compounded. Both parties now appealed from a decision that the Act did not apply to exclude under sections 78 and 80 . .
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The parties agreed that damages were payable in an action for restitution, but the sum depended upon to a calculation of interest. They disputed whether such interest should be calculated on a simple or compound basis. The company sought compound . .
CitedTest Claimants In The Franked Investment Income Group Litigation v Inland Revenue SC 23-May-2012
The European Court had found the UK to have unlawfully treated differently payment of franked dividends between subsidiaries of UK companies according to whether all the UK subsidiaries were themselves UK based, thus prejudicing European . .
CitedLittlewoods Retail Ltd and Others v Her Majesty’s Commissioners of Revenue and Customs ECJ 19-Jul-2012
(Grand Chamber) Second and Sixth VAT Directives – Input tax – Refund of excess – Payment of interest – Procedures
The court considered whether on repayment to a taxpayer of wrongly imposed VAT, the interest returned with the repayment should be . .
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The claimant challenged the reduction of the limitation period from six years to three for the reclaiming of overpaid VAT with immediate effect, depriving it of the opportunity to recover sums paid in excess. The company sold vouchers. It paid VAT . .
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The transitional rules introducing time limits for failing to deduct VAT inputs made insufficient allowance for the decisions in Marks and Spencer and Grundig.
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At ChD (1)Littlewoods Retail Ltd and Others v Revenue and Customs ChD 4-Nov-2010
Overpayments of VAT had been repaid with interest. The claimants suggested that the interest should have been compounded. The court had decided that a reference to the ECJ was necessary. The Court now considered the form of that reference.
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Certain investment trust companies (ITCs) sought refunds of VAT paid on the supply of investment management services. EU law however clarified that they were not due. Refunds were restricted by the Commissioners both as to the amounts and limitation . .
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The court was asked as to the effectiveness under European law of sections 78 and 80 of the 1994 Act.
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Contract Damages; What follows the Breach Naturaly
The plaintiffs had sent a part of their milling machinery for repair. The defendants contracted to carry it, but delayed in breach of contract. The plaintiffs claimed damages for the earnings lost through the delay. The defendants appealed, saying . .
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CitedLittlewoods Retail Ltd and Others v HM Revenue and Customs (No 2) ChD 28-Mar-2014
The claimants had recovered very substantial overpayments made of VAT. They sought recovery of compound interest. The ECJ, on reference, said that this was a matter for national law.
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Court to seek and Apply Parliamentary Intention
The appellant challenged the practice of permitting cell nuclear replacement (CNR), saying it was either outside the scope of the Act, or was for a purpose which could not be licensed under the Act.
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CitedMetallgesellschaft Ltd and Others v Inland Revenue Commissioners and Another Hoechst Ag and Another v Same ECJ 8-Mar-2001
The British law which meant that non-resident parent companies of British based businesses were not able to recover interest on payments of advance corporation tax, was discriminatory against other European based companies. Accordingly the law was . .
CitedIrimie v Administratia Finantelor Publice Sibiu And Administratia Fondului Pentru Mediu ECJ 18-Apr-2013
Repayment of taxes levied by a Member State in breach of European Union law – National system limiting the interest payable by the Member State on the repaid tax – Interest calculated from the day following the date of the claim for repayment of the . .
CitedM H Marshall v Southampton And South West Hampshire Area Health Authority (Teaching) ECJ 26-Feb-1986
ECJ The court considered the measure of compensation in a successful claim for sex discrimination arising from the health authority’s provision of an earlier compulsory retirement age for women compared with that . .
CitedPalmisani v Instituto Nazionale della Previdenze Sociale (INPS) ECJ 10-Jul-1997
(Judgment) (Rec 1997,p I-4025) Social policy – Protection of employees in the event of the insolvency of their employer – Council Directive 80/987/EEC – Liability of a Member State arising from belated transposition of a directive – Adequate . .
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ECJ Directive 69/335/EEC – Registration charges on companies – Procedural time-limits under national law. . .
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CitedTest Claimants In The FII Group Litigation v CIR ECJ 12-Dec-2006
ECJ (Opinion of Geelhoed AG) Interpretation of Articles 43 and 56 EC and Articles 4(1) and 6 of Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent . .

Cited by:
See AlsoFranked Investment Income Group, Non-Test Claimants In The Litigation v Inland Revenue and Another ChD 31-Jul-2019
Two additional issues that arise in the claims of certain non-test claimants in the long-running Franked Investment Income Group Litigation under the group litigation order known as the FII GLO. . .
CitedPrudential Assurance Company Ltd v Revenue and Customs SC 25-Jul-2018
PAC sought to recover excess advance corporation tax paid under a UK system contrary to EU law. It was now agreed that some was repayable but now the quantum. Five issues separated the parties.
Issue I: does EU law require the tax credit to be . .

Lists of cited by and citing cases may be incomplete.
Updated: 10 August 2021; Ref: scu.598454