Travel agencies have been urged not to pay VAT on their fees for taking payment by credit cards, despite HMRC insisting that they should be paying the tax.

VAT expert David Bennett told Abta’s Travel Law Seminar that not paying VAT on these admin charges was the best course of action.

“There’s a strong argument not to pay the tax in the first place – that’s what I would do if I was a travel agent,” said Bennett, who is VAT partner for accountant Saffery Champness.

He added that HMRC was continuing to pursue payment for VAT on credit card fees despite losing two similar cases over fees in the UK.

“Agents could pay the tax under protest which at least protects them from the risk of getting a bill with penalties and interest,” said Bennett.

“If HMRC is eventually forced to accept that VAT should not be paid, then the agent will get the tax back with interest but at the moment the level of interest is derisory.”

Bennett also advised that agents should not charge VAT to clients on the fees to avoid a scenario where they could potentially have to refund it to every customer which he said would be “a complete nightmare”.