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| Version 2 | Version 3 |
|---|---|
| M&S wins tax battle over teacake | M&S wins tax battle over teacake |
| (about 3 hours later) | |
| Marks and Spencer (M&S) has won a 13-year 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 and flapjacks 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 it offered to refund £88,440. | |
| In April 2008 the ECJ said that Marks and 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 | How various products are classified 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 confectionery 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 |