Caffyns has received £2.98 million from HM Revenue & Customs (HMRC) after a claim made as a result of the Marks & Spencer European Court case, relating to VAT overpaid on demonstrator vehicle bonuses in the period 1973 to 1997.

However, Caffyns has made a provision of £2.98m and may have to pay back the sum to HMRC. The claim had previously not been paid pending clarification on a point of law which has still not yet been resolved.

HMRC decided to pay Caffyn's claim for now, but is appealing to the House of Lords against two decisions made during 2006 in cases concerning other businesses unrelated to the company.

The decision on this appeal is scheduled to be heard in the last quarter of this year and may determine whether Caffyns will have to repay £2.98m, plus interest calculated from today.

The amount received includes the claim of £1.38m and interest of £1.6m, Caffyns added.