At the hearing M&S will tell the European Court that it is owed more than Pounds 5.5m in VAT it paid on tea cakes, bottled water, biscuits and gift vouchers to Customs & Excise. The VAT dates back to 1973 and could land Customs with a Pounds 12m bill when interest charges are added.
A spokesperson for M&S said Customs had admitted to overcharging the supermarket group but refuses to return all the VAT because of a ‘three-year capping rule’. But according to the retailer, this rule was introduced only a year after original VAT claim was made and is invalid.
M&S also alleges that Customs refuses to repay the money because it says the retailer has already passed the tax to its customers and therefore it would be ‘unjustly enriched’ if the money were handed back, according to the Evening Standard.
The case is the second major spat with Customs that the High Street retailer has become involved in. In March, AccountancyAge.com highlighted Customs’ fight to recover millions of pounds from an avoidance scheme which imposes a ‘VAT exempt handling fee’ on credit card transactions.
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