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M & S finally to get VAT refund on teacakes!

The ECJ has recently ruled that M & S should get its long awaited £3.5 million VAT refund. For those of you not familiar with this case, M & S have been litigating for many years to obtain a full refund of VAT charged in error on chocolate teacakes between 1973 and 1994. The UK tax authorities had refused to repay this VAT on the grounds that M & S would be “unjustly enriched” as it had passed 90% of the VAT overpaid on to its customers.

M & S was in a VAT payment position (that is, it owed HMRC money after deducting the VAT it paid from the VAT it charged). Prior to 2005, the UK tax authorities treated “payment” and “repayment” businesses differently in relation to unjust enrichment. This was found to be discriminatory and contrary to the EU principles of fiscal neutrality and equal treatment.

The European Court has referred the case back to the House of Lords in the UK for a final judgement.



Date: 15th April, 2008
Author: Jane Stacey


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