The original value of the teacake claim was £3.5m plus interest, of which M&S got just 10% of yesterday. Customs was also made to repay £900,000 plus interest for the gift voucher element.
While a spokeswoman for M&S said the company was ‘disappointed with the teacake element’ she also said it was considering whether to ‘petition for an appeal’. It has 30 days to do so.
The European Court of Justice ruled last year that Customs should not be allowed to apply rules retrospectively, introduced in 1996, that capped repayments of overpaid VAT to three years.
The case was referred back to the domestic courts, which threw out most of M&S’s claims for retrospective VAT repayments.
M&S claimed that products such as chocolate covered teacakes, bottled water and gift vouchers had been incorrectly classified as confectionery by Customs.
As a result it was argued that the company had overpaid VAT dating back to 1973. The Court of Appeals disagreed and ruled that Customs should only have to repay the VAT paid on gift vouchers.
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