British retail giant Marks & Spencer looks set to scoop a multi-million pound tax rebate after winning a European court battle against Customs and Excise.

It's likely that customs will have to pick up a very big bill indeed

Frank Hartley Grant Thornton

The European Court of Justice ruled that a Customs and Excise rule obliging firms which had paid too much tax to claim refunds within three years was in breach of European law.

The decision means that Customs could be forced to pay M&S refunds on value added tax payments stretching back to 1973.

Experts say the court ruling could open the door to claims from thousands of other businesses.

Confectionery blunder

"The decision ... will open the floodgates for similar cases where Customs has refused to pay money to which they were never entitled in the first place," said Tony McClenaghan, head of VAT at accountants Deloitte & Touche.

"It's likely that Customs will have to pick up a very big bill indeed. The range of businesses that could benefit is very wide," said Frank Hartley, VAT partner at accountancy firm Grant Thornton.

Some estimates put the total figure at �12m.

M&S claims it was overcharged after Customs & Excise wrongly classified chocolate covered tea cakes as confectionery, which is liable for value added tax.

It also overpaid VAT on bottled water, biscuits and gift vouchers.

"Obviously we are disappointed with the decision," a spokesperson for Customs and Excise said.

"We now need to take a full, long, look at the decision, take legal advice and see what effect this will have for any future operations."