A 13-year battle over a chocolate teacake was finally settled in the highest court in the land yesterday.

Marks & Spencer took action against the taxman, who charged VAT on its popular chocolate-covered teacakes between 1973 and 1994, successfully claiming they should have been zero-rated as biscuits.

In 1995, the high street chain claimed a repayment of £3.5 million from the Customs and Excise Commissioners who refused to refund 90%, saying the tax had been passed on to customers so M&S would be unjustly enriched by repayment in full.

Yesterday three Law Lords affirmed last year’s decision by the European Court of Justice that M&S was entitled to a full refund.

Lord Walker said the European court’s ruling left open certain matters for the UK courts but the commissioners had decided not to pursue them.

Meanwhile, McVitie’s has slashed the saturated fat content of three of its best known products in a bid to encourage better health and nutrition. The brand’s main Digestive, Hob Nobs and Rich Tea ranges will have 50% less saturated fat which its owner, United Biscuits, said was in response to consumer attitudes.

Jan Boyle, United Biscuits marketing controller, said: “We have invested a massive £6m in McVitie’s Digestives products in order to modify ingredients and production and to communicate the reduced saturated fat message to customers, consumers and the grocery industry. The changes to Digestives, Hob Nobs and Rich Tea are a result of three years’ development work to ensure that the taste and texture of the biscuits remain as good as ever.”