Littlewoods: compound interest claims

On 12 January 2012, Advocate General Trstenjak delivered her opinion in Littlewoods (Case C-591/10). The case concerns whether UK taxpayers can claim interest on a compound basis on VAT reclaimed from HMRC at a higher rate than the simple interest ordinarily payable under VATA 1994 s 78. The AG stated that although the principal of effectiveness is not breached by simple interest paid under s 78, s 78 may breach the principle of equivalence if there are more favourable rules governing the repayment of interest in ‘similar domestic claims’. This is something which the High Court may have to examine, if the CJEU decision follows the reasoning of the AG and may be subject to a further CJEU reference.