Bed bank Hotels4U wants to recoup the money it has paid in VAT over the last decade to HM Customs & Revenue (HRMC) under the Tour Operators Margin Scheme (Toms).
Hotels4U’s appeal to the First-Tier Tax Tribunal comes two years after fellow bed bank Medhotels won its £7.1 million VAT case against HMRC when the UK Supreme Court ruled that Medhotels (also known as Secret Hotels 2) was acting as an agent rather than a principal.
Barrister Valentina Sloane, representing Hotels4U at the tax tribunal at London’s Royal Courts of Justice, said: “The majority of this case is very straightforward because it is materially identical to the facts considered by the Supreme Court in Secret Hotels 2.”
The amount being claimed by Hotels4U from HMRC has not been disclosed and the company’s legal team refused to comment to TTG.
Hotels4U recorded a charge of £14.3 million in its 2012 accounts following an “adverse third party sales tax judgement”. This came shortly after MedHotels lost its Court of Appeal case - a decision then reversed by the Supreme Court in 2014.
Sloane said that Hotels4U was appealing against the decision of HMRC that it had been acting as a principal between 2006 and 2014.
“Much of HMRC’s defence is an attempt to reargue Secret Hotels 2,” she told the tribunal.
“It’s very straightforward and there is no scope for HMRC to distinguish from the Supreme Court decision. The vast majority of hotel contracts were on standard terms and conditions.
“Hotels4U’s booking conditions make it clear that it was acting as an agent, not a principal. It is no part of Hotels4U’s case that it dips in and out of being a principal or an agent.”
Sloane said that Hotels4U had been accounting for VAT “in accordance with the requests of HMRC but did so under protest”.
The tribunal heard that Hotels4U had employed business advisor Deloitte to go through samples of the bed bank’s contracts with 7,500 hotels to “quantify the claim”.
Sloane said that “just under 10%” of these hotel agreements were of a “non-standard” form and that Hotels4U had conceded that it was acting as a principal in only a “miniscule” number of contracts.
“Hotels4U – just like Medhotels – acts as a shop window. It is advertising and marketing the properties all over the world and travellers can book directly with these accommodation providers.”
HMRC is set to present its case later this week.
The tribunal continues.
