But while advisers were celebrating, HM Revenue & Customs was preparing itself to fight on.

‘This is a very complex judgment on which it would be premature to make any comment until the House of Lords has handed down its judgment,’ the taxman said in
a statement.

It has been a typical tactic of HMRC in ECJ cases to fight every legal challenge to the bitter end. It has been a strategy that has worked well for the taxman, and when the ECJ teacake decision is referred back to the Lords, HMRC is not going to change tack.

The teacake case has dragged on for more than a decade and relates to overpaid VAT on chocolate teacakes.

The taxman has always accepted that the High Street retailer had overpaid VAT on the teacakes for a number of years, but argued that repaying the full amount would ‘unjustly enrich’ Marks & Spencer as around 90% of the VAT cost had been passed on to customers.

Marks & Spencer has based its defence on the fact that while HMRC has applied ‘unjust enrichment’ to its valid claim for wrongly paid tax, the taxman has not applied the same principle to block comparable claims made by its competitors, contravening the two European law principles of equal treatment and fiscal neutrality.

Following the ECJ’s decision in favour of M&S, Tony McClenaghan, head of indirect tax at Deloitte, which acted for M&S, said ‘commonsense’ had prevailed.

‘It is unreasonable for different retailers to be treated differently in relation to similar transactions,’ he added.

KPMG indirect tax partner Chris Fyles said the ECJ teacake decision had served up ‘another example of where HMRC have made mistakes incorrectly implementing legislation’, while Andrew Loan, assistant solicitor at law firm Macfarlanes, was encouraging business who may have claims to act ‘as soon as possible’.

Advisers may reckon the fight is over, but although HMRC is on the back foot, it has not conceded just yet.