Barclay Brothers’ Littlewoods Wins $2 Billion U.K. Tax Claim

The U.K. government may have to pay about 1.2 billion pounds ($2 billion) to a home-shopping company owned by the billionaire Barclay brothers after a judge ruled in their favor in a dispute over 30 years of overpaid taxes.

David and Frederick Barclay’s Littlewoods won its claim to receive compound interest on the wrongly collected value-added tax, in a decade-long legal fight that went to the European Court of Justice before being referred back to the U.K. in 2012.

“This is a very complicated case,” Judge Launcelot Henderson in London said handing down a 163-page ruling, “with a huge amount of public money at stake.”

Her Majesty’s Revenue & Customs is facing lawsuits over improperly collected VAT that may prove costly for the British taxpayer. In a separate dispute, more than 100 investment funds are seeking to reclaim as much as 1 billion pounds.

“Today’s judgment means that HMRC will be liable to pay billions in interest to other taxpayers who have already claimed overpaid VAT going back to the early 70s, but have only been paid simple interest,” said Giles Salmond, a tax lawyer at Eversheds LLP, who wasn’t involved in the case. “This is an important victory for taxpayers, but it is very likely that HMRC will seek permission to appeal.”

The Barclays, billionaire owners of Telegraph Media Group and London five-star hotels such as the Ritz, bought Littlewoods for 750 million pounds in 2002.

Complex Issues

“The judgment provides a clear and robust resolution to complex issues raised by English and European law,” Littlewoods, now a unit of the Barclays’ Shop Direct Ltd., said in a statement.

The HMRC said in a statement that it would appeal the ruling, meaning the legal process could drag on for several more years.

“We think today’s decision is at odds with how Parliament intended VAT law to work,” the tax agency said.

Littlewoods said in its statement that if the claim was ultimately successful, the proceeds would go to the Littlewoods companies, not directly to the Barclays, and would be used for further investment.

The Barclays live on the English Channel Island of Brecqhou, which isn’t subject to U.K. taxes.

Shop Direct, Littlewoods’ parent company, yesterday lost a separate tax lawsuit against HMRC over whether it would have to pay corporation tax on VAT repayments.

The case is: Littlewoods Retail Ltd. and ors v The Commissioners for Her Majesty’s Revenue & Customs, Chancery Division, High Court of Justice, HC08C03780 and 03781

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