High Court Rules Interest Payable on VAT in Contract Dispute Settlement

• High Court ruled on consequential matters after main contract dispute judgment where Pharos was owed £495,668.68 inclusive of VAT after setting off counterclaim
• Court determined that interest is payable on the VAT amount because VAT forms part of the consideration and qualifies as debt under the Late Payment of Commercial Debts Act 1998
• The exclusion of VAT from the Contract Price definition did not remove VAT from the contractual obligation or qualifying debt status
• Court applied Part 36 Civil Procedures Rule finding no basis to exclude VAT from sum of money awarded since rules specifically exclude only interest not VAT
• Enhanced interest rate under CPR36 applies to entire sum including VAT element to incentivise settlement as intended by the regime

Source: taxscape.deloitte.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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