In 2012 I made a programme on the Barclay Brothers and tax with the BBC. One of the things I talked about was their VAT claim against HMRC, which I said they must lose.
Good news.
Sometimes it is fun to predict events, especially when it looks like the odds are stacked against them happening as was true in this case. If they'd have won the estimated cost was £17 billion, albeit not all for them.
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I remember that programme! If I remember correctly those beastly Barclay brothers were using deductions to reduce the hotel’s income to the point where no profits were made. This can’t still be lawfull can it?
Yes it can….l
Will it be reported in the Torygraph?
It makes a good headline, but let’s be clear: the Barclay brothers made no claim against HMRC here, and they never claimed £17 billion.
Littlewoods, a company that the Barclay brothers bought in 2002, overpaid about £200m of VAT over a period of about 30 years, because it accounted for VAT on its agents’ commissions, rather that deducting the commission from the amount that it recognised for VAT purposes. HMRC settled the underlying claim by repaying the £200m, and about £250m of simple interest. The company said that simple interest did not compensate it enough, and claimed compound interest. It took another 10 years for a final resolution of the dispute. Compound interest over 40 years made the claim exceed £1 billion. Now the Supreme Court has said that only simple interest is due.
The £17 billion estimate comes from claims for compound interest made by about 5,000 other businesses that also paid tax that was never due in the first place.
Simple question: if I wrongly took £100 from you 40 years ago, and you claimed it back, and the interest rate is 5%, would you be happy for me to repay £100 plus £200 of interest (5% times 40), or would you expect £100 plus approximately £700 of interest (compounding 5% interest annually)?
What did the law say?
It said simple interest
So what should have been paid?
Simple intrest
Next question?
And you have ignored the issue of unjust enrichment
It seems odd of you to be adamant that the law ought to be what the law is – you’re not normally slow to complain about laws being inappropriate, or to advocate looking through law to underlying moral principles 🙂
Google, for example: the law says sales to UK customers are taxable in Ireland. So where should they be taxed? And so forth…
And I am pretty sure the courts have already addressed the issue on unjust enrichment when looking at the underlying VAT position.
Hang on….as usual you utterly miss the point…..
The principle here was unambiguous and clear and they were trying to subvert rather than comply with it
I ado, of course, argue for compliance
How you can always get every argument wrong bemuses me
Yes, the principle of EU law is clear: there should be fair recompense. The point is that UK law appears to be inconsistent with that principle.
Simple interest works well over a few years, but it is clearly not fair over 40 years. The case wasn’t trying to subvert anything, it was just pointing out that a particular law appears to be rather unfair.
There are a lot of unambiguous and clear laws that you seek to change. Is there one rule for you and one for other people?
No
There’s law
And abuse of law
I oppose the latter
If you think that you very clearly do not know what tax avoidance is
Or understand that we have a General Anti-Abuse Rule
I’m afraid a’general anti-abuse rule’ sounds rather discretionary. A sort of gentleman’s agreement based on notions of fair play.
That inspires no confidence in this quarter.
I helped write it….
If I knew pthe minutiae of the case and of HMRC law I may need to side with either you or Jackson.
1) If HMRC law on VAT overpayments states « simple interest » then clearly I agree your view.
2) If HMRC law dies NIT . do do or is unclear on the matter then there was all to play for and indeed dependent on the contractual wording could have led to a finding for the Barclays.
Either way it seens bizarre that HMRC should claim simple interest applies in overpayments when in the majority of underpayment cases they are quck to invoke the compound interest rule in any negotiation.
I do not even begin to understand the concept of unjust enrichment but if it is a tenet of UK fiscal law then surely it should apply not only to HMRC client but when appropriate to HMRC. themselves
Who is to determine that HMRC are not « unjustly enriching » themselves when they claim compound interest for years old underpaid tax ?
Shades of having their cake and eating it methinks.
As far I know it’s always been simple interest – I was staggered anyone tried to take a case
JA “Shades of having their cake and eating it methinks.”
The Parliment can enact whatever legislation they like pretty much. If you don’t like it, then lobby for change. With luck, your MP might even read Tax Research to find out how money is created. And if not this is a good starting point.
Firstly, I don’t disagree with the decision. However;
– the Barclays won their case in the High Court, Court of Appeal & the ECJ so the law cannot have been that clear and unambiguous.
– given that 3 courts have found in their favour, I don’t see how the Barclays have tried to ‘subvert’ anything
– we rely on courts to interpret the law & the SC is the ultimate interpreter.
So the simple reading of the law – that simple interest was payable – was right
I could have told them that for not a lot
It’s what the law says
So of course they were trying to subvert it
Of course the VAT Act says simple interest, and that is a pretty good starting point, particularly if the repayment is made reasonably promptly, but the UK VAT legislation is meant to be implementing VAT in the UK in accordance with European law, and the UK courts often jump straight to considering what the European law says first before considering whether UK law implements it properly.
So what does European law say about the need for an adequate remedy? What does the UK jurisprudence say about the measure of a restitutionary remedy? Those are the sort of points that the company was (entirely reasonably) raising in this court case.
It is not “subverting” the law to ask a court to determine a dispute about what the law is. That is the rule of law in action.
And it decided that parliament meant what it said
In fact, all their money seems to have made them miserable.
To the extent that they delight in heaping misery on others.
So let’s have a long look at how it would have [financially] affected them/their-other-companies, if the case had been found in their favour….
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