Dealers hopes for another VAT windfall have been dashed. The Supreme Court yesterday overturned earlier positive court decisions in relation to Littlewoods’ claim for compound interest on overpaid VAT.

For the many motor dealers with similar cases in relation to the VAT treatment of demonstrator vehicles, this is disappointing as it also, in all likelihood, brings an end to the motor industry claims, says automotive accountancy ASE.

The court took the view that the payment of simple interest rather than compound interest is an “adequate indemnity” as required following the previous judgement of the European Court, and that the lower UK Courts were incorrect to take the view that this term required the payment of compound interest, which is what the motor industry has been claiming.

Michelle Malone, tax director at ASE said, “This is obviously a disappointing decision for the dealers who had claims standing behind the Littlewoods’ case and unfortunately means that those claims can no longer proceed.

"Whilst this would have been a very welcome windfall indeed if successful, retailers can now draw a line under the matter and plan their business accordingly.”