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HMRC to resist big Littlewoods pay-out

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The HMRC has been given the green light to challenge the decision of a £1bn pay-out to Littlewoods at the Supreme Court.

Littlewoods has been in a long running conflict with the HMRC after overpaying on VATs for the last 30 years. Though the home delivery company was awarded the money paid in excess, as well as interest, it argued that it should receive compound interest, that is, interest charged on interest already gained. If this goes through, a £250m pay-out would turn into £1bn.

Last week the Court of Appeal supported Littlewoods’ claim. In response, the HMRC said that the decision was “at odds with how parliament intended value added tax law to work,” and that it would “now seek leave to appeal to the Supreme Court.”

There is also the danger that should Littlewood’s claim be completely successful, it will pave the way for the thousands of other companies making similar claims. This lead to bailouts worth several billions of pounds, paid via public funds at a time of economic recession.

In a statement Littlewoods said it was “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 retailer added that in the event of a successful claim, the payment would go to companies that pay UK tax, rather than shareholders.

“In these circumstances the net proceeds will be used for further investment for the benefit of all stakeholders.”

In accordance to its many legal battles regarding tax, last year the HMRC doubled its estimate of the possible cost of tax litigation losses to £29bn, “due to a revision of the estimates for cases currently in litigation and taking into account court decisions during the year."

Published on Thursday 07 January by Philip Gallagher

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