'jvm-1.8' is not a valid choice for '-target'

IntelliJ complains with the following exception when I try to make my project.

Error:scalac: 'jvm-1.8' is not a valid choice for '-target'
Error:scalac: bad option: '-target:jvm-1.8'

But a 'gradlew clean install' works just fine.

The project setup is:

gradle version 2.3

scala 2.10 and java

3 of the 4 modules use java 1.7 (source and target compatibility), the 4th module has source and target compatibility 1.8 and is causing the problem.

Any ideas how I can avoid the error? (moving to java 7 is not an option, upgrading scala is)