The billionaire Barclay brothers have lost a decades-long battle with HMRC after the Supreme Court ruled that the taxman does not owe them £1.25 billion.
David and Frederick Barclay had been pursuing the claim after Littlewoods, the retailer they own through Shop Direct, overpaid VAT to HMRC between 1973 and 2004.
The company had already received a £205 million refund from HMRC, together with "simple interest" of £268 million, according to court filings.
But Littlewoods has been seeking "additional interest" calculated on a compound basis amounting to £1.25 billion on the grounds of the "common law of restitution, either as restitution for a mistake of law, or as restitution of tax unlawfully demanded".
However, the Supreme Court unanimously dismissed the claim.
"The payment of interest in this case cannot realistically be regarded as having deprived Littlewoods of an adequate indemnity," the judgment read.
The case is significant for HMRC as, had it lost, it would have faced the prospect of hefty bills for other companies with similar grievances.
The Barclay brothers, who also own the Telegraph newspaper titles, said in a statement: "This is a disappointing outcome. Having succeeded in the High Court, the European Court of Justice and the Court of Appeal in a long process lasting over a decade, we are surprised by the Supreme Court's decision.
"Given the importance of the legal issues and the sums at stake, we felt a duty to pursue this to its ultimate conclusion. To that end, today's decision has provided legal certainty and we can now finally draw a line under this case."
The Barclays scrapped a proposed £3 billion sale of Shop Direct in July, citing uncertainty created by the general election.
A number of heavyweight private equity firms had mulled taking over the firm, which is behind also behind Very.co.uk as well as Littlewoods.com.
However, a collapse in consumer confidence and a slowing economy are thought to have scuppered the possibility of a deal being struck.