Lawyers representing Sir David and Sir Frederick Barclay return to high court over six-year battle over record HMRC settlement
Lawyers for tax haven-based tycoons Sir David and Sir Frederick Barclay this week return to the high court in London to pursue the final leg of their six-year battle to extract a record £1bn VAT settlement from HMRC for the brothers' Littlewoods catalogue business.
Littlewoods has already received over £470m after the UK authorities accepted in 2004 that there had been an incorrect tax treatment of commissions paid to an army of Littlewoods regional agents during the previous 31 years.
That ruling led to an initial settlement which included interest value of £268m. The decision was a huge victory for the Barclay twins and their family, who were able to reap the benefits of decades of incorrect VAT treatment despite only having bought the business two years earlier.
But the brothers, who spend much of their time in the tax havens of Monaco and their private island of Brecqhou in the Channel Islands, have since claimed this payout was insufficient compensation for years of VAT overpayments by Littlewoods. In 2007 they claimed a further £1bn was needed to settle the matter.
The brothers, owners of the Telegraph newspaper titles and the Ritz hotel, hired John Kay, professor of economics at London School of Economics, to testify that compound interest is the most appropriate measure to assess compensation. The initial settlement used simple interest.
The argument has already been through the British courts once, before it was referred to the European Court of Justice. The court in Luxembourg ruled that it was for the British court to determine the interest in such cases, so the matter returns to the high court in London this week.
In a statement, a spokesman for the Barclay family told the Guardian: "The Barclay family acquired the loss making Littlewoods business in 2002 and this claim had been lodged prior to the purchase. The size of the compound interest claim reflects the fact that VAT was incorrectly collected by HMRC for almost 40 years.
"The directors would be breaching their fiduciary duties if they did not pursue the claim. The family have responsibilities to the broader group's 20,000 current employees, as well as former Littlewoods staff through the significant legacy pension obligations."
Though their offshore family trust, the Barclays had acquired loss-making Littlewoods – together with its claim against HMRC – for £750m in 2002 from the billionaire Moore family. Founded in Liverpool in the 1930s, together with its sister football pools business it had for years been one of Britain's largest privately owned corporate empires.
In 2003 the Barclay family acquired the catalogue retailing division of General Universal Stores, merging it with Littlewoods and renaming the holding company Shop Direct. They have since added a number of smaller acquisitions, including buying the web brand for Woolworths from administrators in 2009.
Latest accounts for Shop Direct show the business, with just over 14,300 staff, made a pretax loss of £300m on sales of £1.7bn for the year to June 2012. It made a top-line operating profit of £33.6m.
Article Source : http://www.guardian.co.uk
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