December 13, 2007 / 11:09 AM / 12 years ago

M&S seen due tax refund over teacakes

A logo is seen on clothes hangers in a Marks & Spencer store in the City of London May 22, 2007. Marks & Spencer <MKS.L> is entitled to a full refund of wrongly paid value-added tax on sales of its chocolate teacakes, an adviser to the European Union's top court said on Thursday. REUTERS/Toby Melville

BRUSSELS (Reuters) - Marks & Spencer (MKS.L) is entitled to a full refund of wrongly paid value-added tax on sales of its chocolate teacakes, an adviser to the European Union’s top court said on Thursday.

When VAT was introduced in 1973, the store’s “teacakes” were classified as biscuits therefore subject to the standard sales tax rate. Cakes are zero rated.

In 1994, Britain’s customs authority admitted the teacakes should not be subject to VAT and the company claimed 3.5 million pounds.

Customs only paid 88,440 pounds to the company, saying that most of the VAT burden had been passed on to customers in any case and that paying the refund in full would amount to “unjust enrichment”.

Advocate General Juliane Kokott, an adviser to the European Court of Justice, said the “unjust enrichment” objection cannot be invoked as long as it offended the principle of equal treatment.

The full court backs an advocate general in most cases.

Reporting by Huw Jones, editing by Paul Boilding

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