Thursday, 18 February 2016
UK: VAT repayment subject to corporation tax - Supreme Court gives judgment in post cessation receipts case
The Supreme Court gave judgment yesterday in Shop Direct Group v Revenue and Customs  UKSC 7. The court unanimously held that Shop Direct Group (SDG), a company in the Littlewoods Group, was liable to pay corporation tax when it received a repayment (as beneficial owner) of overpaid value added tax of approximately £125 million. The repayment related to supplies made between 1978 and 1996 by companies within the Group, including SDG. In doing so, within the legislative framework for the taxation of post-cessation receipts, the court rejected the argument that the repayment was only taxable in the hands of the former trader. Lord Hodge stated: "No sound reason of policy has been suggested for confining the charge to the former trader and his personal representatives" (para. ). The legislation in question had its origins in measures designed to close a loophole whereby receipts received after the discontinuance of a trade escaped the charge to tax. The hearing before the justices was recorded, and can be watched here. The court's judgment was delivered by Lord Hodge. A summary is available here (pdf) and was also delivered by Lord Hodge in person: see the video below.