M&S told the European Court that it was owed more than Pounds 5.5m in VAT paid on tea cakes, bottled water, biscuits and gift vouchers to Customs & Excise. The VAT dates back to 1973 and climbs to Pounds 12m when interest charges are added.
M&S also has the backing of the European Commission, which submitted a written objection in August to Customs’ refusal to hand back the money.
Customs has admitted to overcharging the supermarket group but refuses to return the VAT because of a ‘three-year capping rule’. The rule allows the government office to withhold VAT repayments which go back more than three years.
The retailer argues the rule is invalid as it was introduced only a year after the original VAT claim was made and is invalid.
Customs will argue that it does not have to pay back the money to M&S because the retailer has already passed the tax on to its customers and therefore it would be ‘unjustly enriched’ if the money were handed back.
A spokesman for M&S said the retailer was confident of victory.
Last month Customs told Accountancy Age.com it believed it had acted quite properly and had a strong case.
A ruling is not expected for some months.
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