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| M&S wins tax battle over teacake | M&S wins tax battle over teacake |
| (about 12 hours later) | |
| Marks & Spencer (M&S) has won a 13-year legal battle over the UK tax status of its chocolate-covered teacake. | Marks & Spencer (M&S) has won a 13-year legal battle over the UK tax status of its chocolate-covered teacake. |
| M&S took action against the taxman, who charged £3.5m VAT on teacakes between 1973 and 1994, after having them wrongly classified as biscuits. | M&S took action against the taxman, who charged £3.5m VAT on teacakes between 1973 and 1994, after having them wrongly classified as biscuits. |
| UK tax officials recognised the teacakes had been wrongly classed, but refused to pay back all the wrongly charged VAT that M&S had paid. | UK tax officials recognised the teacakes had been wrongly classed, but refused to pay back all the wrongly charged VAT that M&S had paid. |
| Three Law Lords have now reaffirmed M&S is entitled to a full refund. | Three Law Lords have now reaffirmed M&S is entitled to a full refund. |
| How VAT works on cakes and biscuits | How VAT works on cakes and biscuits |
| They upheld last year's decision by the European Court of Justice (ECJ). | They upheld last year's decision by the European Court of Justice (ECJ). |
| Under UK tax rules, most traditional bakery products such as bread, cakes, flapjacks and Jaffa Cakes are free of VAT, but the tax is payable on cereal bars, shortbread and partly-coated or wholly-coated biscuits. | Under UK tax rules, most traditional bakery products such as bread, cakes, flapjacks and Jaffa Cakes are free of VAT, but the tax is payable on cereal bars, shortbread and partly-coated or wholly-coated biscuits. |
| In 1995 Marks & Spencer claimed a repayment of £3.5m for the VAT payments it had made, but the Commissioners of Customs and Excise refused to refund 90% of the tax. | In 1995 Marks & Spencer claimed a repayment of £3.5m for the VAT payments it had made, but the Commissioners of Customs and Excise refused to refund 90% of the tax. |
| It argued that paying back the total sum would "unjustly enrich" M&S as customers had paid the VAT on the teacakes, and offered to refund £88,440. | It argued that paying back the total sum would "unjustly enrich" M&S as customers had paid the VAT on the teacakes, and offered to refund £88,440. |
| In April 2008 the ECJ said that Marks & Spencer was entitled to a full refund, and on Wednesday the conclusion was not challenged in the Lords. | In April 2008 the ECJ said that Marks & Spencer was entitled to a full refund, and on Wednesday the conclusion was not challenged in the Lords. |
| Lord Walker said the ECJ ruling left open some matters for the UK courts but that the customs commissioners had decided not to pursue them. | Lord Walker said the ECJ ruling left open some matters for the UK courts but that the customs commissioners had decided not to pursue them. |
| "After 13 years of litigation, we are pleased that this matter is now finally concluded," the company said in a statement. | "After 13 years of litigation, we are pleased that this matter is now finally concluded," the company said in a statement. |
VAT ON CAKES AND BISCUITS | VAT ON CAKES AND BISCUITS |
How various products are classifed by HM Revenue and Customs | How various products are classifed by HM Revenue and Customs |
| Zero rated [no VAT] Standard rated [15% VAT] "Biscuits" Â Chocolate chip biscuits where the chips are either included in the dough or pressed into the surface before baking All wholly or partly coated biscuits including biscuits decorated in a pattern with chocolate or some similar product Jaffa Cakes Gingerbread men decorated with chocolate unless this amounts to no more than a couple of dots for eyes Bourbon and other biscuits where the chocolate or similar product forms a sandwich layer between two biscuit halves and is not continued on to the outer surface Chocolate shortbread "Cakes" Â Marshmallow teacakes (with a crumb, biscuit or cake base topped with a dome of marshmallow coated in either chocolate, sugar strands or coconut) "Snowballs" without such a base are classed as confectionary Caramel or "millionaire's" shortcake consisting of a base of shortbread topped with a layer or caramel and (usually) chocolate or carob Shortbread partly or wholly chocolate-covered Flapjacks Cereal, muesli and similar bars with honey or other added sweetening matter | |
| Return to text | Return to text |