Marks & Spencer (M&S) has won its legal battle over how much tax it should pay on its chocolate-covered teacakes.
The retailer claimed it had overpaid tax for more than 20 years on the products because they fell into the chocolate biscuits category – items that are charged at 15% VAT.
Yesterday the House of Lords said HM Revenue & Customs (HMRC) has abandoned its case and M&S could now be set to claim £3.5m in returned taxes.
The retailer was originally offered £350,000 by Customs & Excise in 2004 on the basis that most of the VAT had been passed on to consumers.
Last April the European court ruled that the M&S product was a cake and not a biscuit but HMRC could still have defended itself.
The move by the European courts may open the door for other retailers to reclaim taxes.
