Golf clubs lose multi-million pound VAT ‘compound interest’ case

Alistair Dunsmuir
By Alistair Dunsmuir November 13, 2017 13:04

Hundreds of private members’ golf clubs will not be receiving a VAT rebate worth hundreds of millions of pounds following a Supreme Court ruling.

The case, which has been going on for over a decade, involved retailer Littlewoods, and is separate to the Court of Justice of the European Union (CJEU) ruling in 2013 that green fees at private members’ golf clubs should have been exempt from VAT, which led to more than 450 golf clubs collectively receiving hundreds of millions of pounds from HMRC about a year ago.

Littlewoods had been locked in a long-running battle with HMRC, arguing that tax rebates owed to the company should include compound interest. If the firm had been successful it would have probably resulted in huge rebates for about 5,000 organisations, including hundreds of golf clubs, involving VAT refunds stretching back over two decades.

Golf clubs set for another multi-million pound VAT rebate

However, the Supreme Court has ruled HMRC will not have to pay Littlewoods £1.25 billion in relation to VAT overpayments and allowed an HMRC appeal to an earlier ruling that said denying Littlewoods compound interest was in violation of EU law.

The Barclay brothers-owned company overpaid millions in VAT to HMRC over the period 1973 to 2004. The taxman repaid Littlewoods £205 million along with simple interest of £268 million in the following years.

Littlewoods then took legal action seeking £1.25 billion in compound interest from HMRC as restitution for the ‘mistake of law’ or ‘unlawfully demanded tax’, which the Supreme Court has unanimously dismissed.

Andrew Hubbard, tax consultant at RSM commented that the judgement would be an immense relief to HMRC.

He said: “The latest HMRC accounts revealed there were 19 ongoing cases in which HMRC was potentially liable to make tax repayments exceeding £100 million – with the total contingent liability reaching almost £19 billion.”

A spokesman for Marlborough Golf Club in Wiltshire said: “This is disappointing for us as a successful outcome would have substantially increased our refund.

“Having said that, the taxman had another trick up his sleeve. In anticipation of the worst outcome, the government had already introduced a 45 per cent corporation tax rate for such repayments!

“So we have reached the end of a long road now. We will need to be rather more prudent with the windfall we received last year but it is nice to be debt free with some ‘rainy day’ money.

“Littlewoods have accepted the judgement and moved on. So must we.”

 

Alistair Dunsmuir
By Alistair Dunsmuir November 13, 2017 13:04
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2 Comments

  1. Tanner November 16, 16:42

    A totally unjust decision typical of our tax stealing government not to pay proper restitution.

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