How did they come to overpay their VAT in the first place?
I don't know the detail of the case but it is probably underclaimed input tax. A similar situation arose with universities in the 1990's which resulted in a three year cap being introduced after the consultants jumped on the money tree and banged in claims going back twenty odd years. Huge amounts were involved.
There was a rash of similar cases relating to mail order businesses (Grattans was one I recall) where the supplying retailer paid VAT on the full price of goods supplied because HMRC wouldn't at the time accept the premise that the price of goods was retrospectively price less commission paid to customers (who were also 'agents' of the business and allowed to offset commission as a discount against purchases of goods). When the 1978 VAT directive was implemented, it allowed for the retrospective adjustment of the cost of goods for mail-order businesses. The opportunity to reclaim 'overpayments' of VAT for the period from 1973 (introduction of VAT) to 1978 (new directive) or later, arose much more recently. I remember an investment analyst explaining the likely outcome, but don't recall why the opportunity for redress against HMRC came so long after the period to which it related.
Completely agree with the HMRC win on the issue of compound interest and Littlewoods - its not as if HMRC has unfairly enjoyed an opportunity itself to earn compound interest on the money it withheld and has already paid simple interest on as a rebate. The Barclay brothers were just stupid/ill-advised/greedy (choose any you think apply!).
