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Barclay brothers lose £1.25bn tax case against HMRC

Barclay brothers lose £1.25bn tax case against HMRC

By Wealth correspondent

Supreme court rules the taxman will not have to repay Barclay-owned Littlewoods more than £1bn in interest on historic VAT overpayments

The billionaire Barclay brothers have lost a legal battle with HM Revenue & Customs, after the supreme court ruled that they are not owed £1.25bn related to tax overpayments.

The UK’s highest court ruled on Wednesday that HMRC should not have to repay Littlewoods, the retailer owned Frederick and David Barclay, more than £1bn in “compound interest” on historic VAT overpayments.

If the brothers – who are jointly ranked the 15th richest in Britain with a £7.2bn fortune according to the Sunday Times rich list – had won the long-running legal battle it could have opened the floodgates for more than 5,000 of similar cases. The other claims could have seen the taxman being forced to pay out more than £17bn. 

The twins, who own the Ritz hotel and the Daily Telegraph, began legal proceedings against HMRC more than a decade ago. The claim focused on £205m of VAT that Littlewoods overpaid between 1973 and 2004.

HMRC paid Littlewoods back the £205m and “simple interest” of £268m. But Littlewoods’s lawyers said HMRC should have paid the company £1.25bn in “compound interest”, which would include the interest on the principle sum and the interest on the lost interest.

Littlewoods said it should be repaid the higher figure “as restitution of tax unlawfully demanded”.

However, the supreme court unanimously dismissed the claim, stating: “The payment of interest in this case cannot realistically be regarded as having deprived Littlewoods of an adequate indemnity.”

The 83-year-old brothers, who live in a castle on the island of Brecqhou in the Channel Islands and in Monaco, said: “This is a disappointing outcome. Having succeeded in the high court, the European court of justice and the court of appeal in a long process lasting over a decade, we are surprised by the supreme court’s decision. 

“Given the importance of the legal issues and the sums at stake, we felt a duty to pursue this to its ultimate conclusion.”

They said the decision provided “legal certainty” and they would now “finally draw a line under this case”.

HMRC said: “This is a great outcome for the UK taxpayer. The supreme court’s confirmation of HMRC’s understanding of EU and UK law on the payment of interest on VAT repayments will protect billions of pounds to fund the UK’s public services.”

Tax experts said if HMRC had lost the case it could have been forced to pay out “enormous” amounts to other companies.

“In one of the largest tax disputes to go to court to-date, HMRC will unsurprisingly be pleased with today’s outcome,” said Dominic Stuttaford, a tax partner at law firm Norton Rose Fulbright. “It is not only the amount at stake in this particular instance but also the number of other EU-related claims for compound interest.

“The saving for the exchequer will be enormous, estimated to be over £17bn for claims relating to VAT repayments standing behind this case. Notwithstanding that, if the judgment had gone against HMRC, the effect would have been diluted by the fact that the interest would have been subject to 45%.”


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