The Upper VAT Tribunal, part of the Ministry of Justice, has confirmed that HMRC is not required to pay compound interest to taxpayers on VAT repayments. However, the door has been left open for an appeal by businesses seeking restitution of any loss, according to Hannah Dobson, VAT director at Smith & Williamson, the accountancy and financial services group.
 
“While many taxpayers have already lodged their claims behind the outcome of this case, others may now feel encouraged to follow suit as it is almost certain this case will be subject to appeal.
 
“Despite the recent decision by the Upper VAT Tribunal, it is possible that the Higher Courts and potentially the European Court of Justice may be less restricted by the provisions of the VAT Act 1994 and look at the wider scope of ‘loss’ and the correct restitution of this loss.
 
“Many appeals have already been lodged behind the most recent joint case and the case of VIC-GLO (released May 2008), so it is just a matter of time before we hear more from the courts about compound interest on VAT repayments. There’s a lot at stake for both the taxpayer and HMRC.”