Entitlement to Discretionary Interest on VAT Repayments: Colaingrove Ltd v HMRC Upper Tribunal Decision

Colaingrove Ltd – Taxpayer granted permission to appeal to the CoA – additional interest – s84(8) (now repealed) – no date set

• Appeal Granted for Additional Interest: Colaingrove Ltd, a group supplying leisure services, has been granted permission to appeal to the Court of Appeal regarding additional interest claims under the now-repealed section 84(8) of the VAT Act. The taxpayer seeks £8,244,823.19 in additional interest, calculated as the difference between the statutory interest paid and their estimated borrowing costs.
• Initial Tribunal Findings: The First-tier Tribunal (FTT) initially ruled that it could award additional interest under section 84(8) based on its interpretation of the statutory powers related to indemnity. However, it also determined that it lacked jurisdiction to award such interest for decisions made on or after April 1, 2009, in accordance with HMRC’s objections.
• Upper Tribunal Agreement with HMRC: The Upper Tribunal (UT) upheld HMRC’s position, stating that section 80 of the VAT Act, introduced by the Finance Act 1989, serves as the exclusive remedy for VAT repayments. Consequently, the FTT was found to have no jurisdiction to grant additional interest under section 84(8) for the relevant periods.

Source KPMG

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• The Upper Tribunal examined if Colaingrove Ltd was entitled to discretionary interest on large VAT repayments under section 84(8) VATA 1994.
• The First-tier Tribunal partly allowed Colaingrove’s claim, granting some additional interest but denying it for decisions after 1 April 2009.
• HMRC argued section 84(8) never applied to section 80 claims; Colaingrove argued it still applied post-2009 and that EU law required more compensation.
• The Tribunal reviewed extensive litigation history and evidence of Colaingrove’s borrowing costs.
• The FTT found Colaingrove was always in net debt, so VAT overpayments increased its borrowing needs, justifying potential additional interest.

Source: bailii.org

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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