AG offers her opinion in Littlewoods case
Last week saw the release of the Advocate General’s (“AG”) opinion in the case of Littlewoods Retail Ltd v HMRC, on which the UK courts had referred a number of question to the European Court of Justice (“ECJ”). The Littlewoods case had given the UK courts a number of points to consider in relation to taxpayers entitlement to receive a payment of compound interest following the repayment of VAT collected by HMRC in breach of EC Legislation. A number of cases in the courts have been ‘stayed’ pending the outcome of the Littlewoods ECJ reference.
In her opinion, the AG states that a taxpayer has a right to recover the VAT collected in error by the authorities, and a right to interest on the principal sum that is repaid. However, she also goes on to state that whether that interest is calculated on a ‘simple’ or ‘compound’ basis is a matter for the Member States themselves to determine, in accordance with the European legal principles of effectiveness and equality.
It must be noted however that this merely represents the AG’s opinion on the matter, and it only operates as guidance to the ECJ in reaching their own conclusion. Although the ECJ’s track record is that they normally follow the AG’s opinion, it is not always the case and the matter will not truly be decided until the ECJ releases its full judgement later in the year. So whilst on the face of this the AG’s opinion is not good news for UK taxpayers, all is not yet lost .
Furthermore, although the AG appears to be confident that the payment of simple interest by HMRC complies with the European principle of effectiveness, it is likely to be necessary for the UK Courts to consider if the relevant legislation complies with the European law principle of equivalence. This represents a glimmer of hope (and no more than that) for the many UK taxpayers that are eagerly awaiting this decision.