Dealers pursuing a ‘class action’ against HM Revenue & Customs could stand to win four times the amount of VAT compound interest owed to them on demonstrator vehicles, sums that could run into millions of pounds.

More than 60 cases have been brought to the High Court by Trevor Jones Chartered Accountants and McGrigors Solicitors. Each of the claimants has received a large VAT repayment for tax incorrectly demanded on the sale of demonstrators and manufacturers’ bonuses.

Each also received interest at the statutory rate. However, Trevor Jones and McGrigors argue European law entitles dealers to a full remedy to put them in the same position they would have been in had they not been ordered to overpay VAT.

The High Court has ordered the claims to proceed as a Group Litigation Order which will test the issue for all claimants.

Their representatives believe dealers could be compensated by up to four times the value of the statutory interest claim if successful.

The National Franchised Dealers Association is also mounting a campaign. It has received advice from PricewaterhouseCoopers and is considering how to best advise its members.

Sue Robinson, NFDA director, said: "This case may be highly significant for NFDA members who have been wrongly required to account for VAT on demonstrators and who have already received interest payments based on the statutory rate.

"The decision recognises that in modern economic conditions, simple interest does not provide full compensation to the aggrieved taxpayer in a case where payment lasted for an extended period."