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Littlewoods compound interest case: Supreme Court reserves judgment

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The Supreme Court has reserved its judgment on whether restitutionary claims for compound interest are prevented by statute, as HMRC argues, on a reading of whether VATA 1994 s 78 (official error) and s 80 (overpaid output tax) should be taken together. A finding in HMRC’s favour would mean Littlewoods having to establish that payment of simple interest is contrary to EU law. The Court of Justice ruled in 2012 that there is no right in EU law to compound interest, before returning the matter to the UK courts to decide whether the UK’s interest provisions provide claimants with adequate indemnity. Further arguments on the meaning of ‘adequate indemnity’ have now led the Supreme Court to consider whether another reference to the Court of Justice is required. If a reference is made, the other issues are likely to drop out. The Supreme Court usually takes around three months to deliver its judgment following the hearing.