Lastminute.com considers options after seven million pound VAT bill
Lastminute.com is considering its options after the Court of Appeal found Secret Hotels owed £7 million in VAT to Her Majesty’s Revenue and Custom.
The bedbank owned by Lastminute.com, which was previously called MedHotels, will now consider appealing to the Supreme Court.
The long running tax dispute dates back to 2004 with the UK tax office arguing MedHotels was liable for the unpaid VAT under the Tour Operators’ Margin Scheme.
It claimed the bed bank was acting as a principle between 2004 and 2007 rather than an agent.
MedHotels is now owned by Thomas Cook, but former owners Lastminute.com are liable.
Following the ruling, a Lastminute.com spokesman said: "The decision is disappointing and we’re currently looking into this further to assess our options."
A spokesman for the HMRC said: "The Court of Appeal has confirmed HMRC’s decision that Secret Hotels was obliged to pay UK VAT on its margin in accordance with the rules for tour operators."
An Upper Tribunal back in 2011 had ruled that MedHotels’ agreements with hoteliers meant it had been acting as an agent and was not liable for VAT, see previous story.
Daniel Barlow, an indirect tax partner at Deloitte, comments: "This case is very significant because UK based travel businesses acting as a principal are obliged to account for UK VAT under the Tour Operators Margin Scheme (TOMS). Disclosed agents have no such obligation and, therefore, can account for less UK VAT when selling overseas product.
"This difference in tax treatment means it can be more beneficial from a UK VAT perspective to trade as a disclosed agent in relation to the supply of overseas travel products than it is to buy and sell them. The Court of Appeal says that one must look both at the contracts and what the parties actually do when determining whether a travel business is a principal or agent.
"In light of this decision, and the win for HMRC, many travel intermediaries will no doubt want to confirm whether their position in the supply chain is one of agent or principal."
An ABTA spokesman said: "We will be considering the judgement in detail and working closely with HMRC before issuing guidance to members."
Diane
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