The European Court of Justice has ruled that Marks and Spencer was wrongly made to pay Value Added Tax of GBP3.5bn (US$6.91bn) on chocolate teacakes over a 20-year period.
The UK Treasury had classified teacakes as biscuits, but they have since been reclassified cakes – and as such are free from VAT.
The EJC ruled that the entire amount of VAT should, in principle, be repaid. However, it added that the final decision would be left to UK courts.
The UK government argued that repayment of the total sum would unjustly enrich Marks and Spencer as consumers – not the company – paid the money.
The decision now falls to the House of Lords.
“This is a very complex judgment on which it would be premature to make any comment until the House of Lords has handed down its judgment,” Revenue and Customs said in a statement.
Marks and Spencer was unavailable for comment as just-food went to press.