M&S seeks teacake VAT refund

With backdated interest, M&S's claim comes to £12m

By BBC business reporter Martin Lewis

Marks & Spencer is challenging Customs & Excise chiefs, after being unable to reclaim VAT it incorrectly paid on teacakes, biscuits and bottled water.

While the battle may sound like a storm in a teacup, it could be worth £12m to M&S - a handy sum for a company which has struggled to maintain profits.

The case has been referred by the UK Court of Appeal to the European Court of Justice, where the two sides have already put forward written arguments, and were set to give verbal statements on Thursday.

M&S believes its claim dates back to 1973.

Backdated interest

The retailer claims it paid £3.3m too much VAT on teacakes, £1m too much on bottled water, £800,000 on gift vouchers and £500,000 on tinned biscuits.

Including backdated interest, these sums amount to £12m, M&S claims.

The retailer argues its case is backed by the European Commission.

But Customs & Excise say that, as M&S passed the extra charges on to consumers, a rebate would be inappropriate.

The case is set to spend six months with the European Court of Justice, before returning to the Court of Appeal.