Marks and Spencer (M&S) won a landmark victory last year in the European Court of Justice (ECJ). The case concerned whether or not HMRC were correct to limit the amount of VAT they repaid to the company after their chocolate teacakes were reclassified as a cake rather than a chocolate biscuit. The issue of cakes and chocolate biscuits is an important one as cakes are zero rated rather than standard rated. The case dates back many years.
HMRC only repaid M&S 10% of the output tax it had overpaid on sales of chocolate teacakes on the grounds that the other 90% had been suffered by the customer and so M&S would be ‘unduly enriched’ if it was all repaid. The ECJ ruled in favour of M&S and the case was referred back to the House of Lords.
The House of Lords has now confirmed that HMRC will not contest this issue further and that M&S are due their refund. This opens the way for other claims of this nature. If you think that this case may have implications for your business, please do get in touch with us.
Source: Parliamentary judgment Times online article