A First Tier VAT Tribunal has ruled in favour of the collapsed Lowcostholidays and Lowcostbeds – both part of the Lowcosttravelgroup, which failed in July 2016.
It is the latest defeat of HMRC by the travel industry, with judges ruling that both businesses (referred to in the judgment as Lowcost) had acted as agents and were subsequently not liable to pay Toms.
In a written verdict delivered just seven working days after the hearing, Judge Philip Gillett said: “In our view… the contract between Lowcost and the customer is one under which Lowcost is clearly acting as the agent of the accommodation provider.”
He added: “We concluded that Lowcost was not within the special VAT regime in Toms… on the basis that it was acting as a disclosed agent under English law”.
Lowcosttravelgroup had been attempting to recoup up to £2 million from HMRC at the time of its collapse, according to Chris Photi, head of travel and leisure at White Hart Associates.
Photi said that HMRC had been “knocked out of the park on this one”.
“Lowcost was clearly acting as an agent,” he said, adding that the judge had reached this conclusion even though, in some cases, there were no signed contracts with hoteliers.
HMRC is thought to be holding on to up to £100 million in VAT refunds relating to eight cases. “They are not keen to give it back,” Photi added.
HMRC can now seek further judgments all the way up to the European Court of Justice (CJEU), although Brexit means this final step may be unlikely. “I don’t think the CJEU will take any new cases, but I understand that two have already been referred,” Photi added.
