Not so interesting
If you get a repayment of income tax or corporation tax, it generally comes with interest. Not much, but some, and it’s automatic. If you get some VAT back, you have to claim interest, and they’ll only pay it if you can show that the overpayment was their fault rather than yours. If you claim some input tax late because you forgot, they will have had the money in the meantime but they won’t owe you any interest.
Even if you are entitled to interest – remember, that’s because HMRC were wrong to collect the tax from you – they pay a low rate set by law and they calculate it on a simple basis, not compound. Over a few years, that makes a huge difference. So some taxpayers who have won the right to repayments of VAT going back to 1973 have argued that they ought to be paid something more realistic – a bank would compound interest and charge a higher rate, and the business may have had to borrow from a bank for 30 years because HMRC have had the money, so surely compensation should come with compound interest.
Some very large claims have been made, but the Advocate-General of the European Court has given an opinion that favours HMRC. It isn’t certain yet, but she suggests that this is the sort of thing that EU member states should be allowed to determine for themselves – if there was no interest at all the ECJ would step in, but as there is some, that’s all right.
If you have had a VAT repayment in recent years, you will want to watch out for the final outcome. The court usually agrees with its Advocates-General, but occasionally goes the other way. HMRC will be hoping this one follows the normal course.