Hotels4U launched its endeavour to claim monies it had paid in VAT over the past decade to HM Revenue & Customs (HMRC) under the Tour Operators Margin Scheme (Toms) in May. Although Hotels4U was discontinued as a consumer-facing brand last December, it still exists as a limited company.
The case concerned whether Hotels4U was supplying services to travellers as an agent or a principal. The company claimed to be an agent, meaning its supplies were not liable for VAT in the UK. If it had acted as principal, it would have had to pay VAT under Toms.
Hotels4U’s appeal to the First-tier Tax Tribunal came two years after B2B bed bank Medhotels (also known as Secret Hotels2) won its £7.1 million VAT case against HMRC, when the UK Supreme Court ruled it was acting as an agent.
There are currently a number of high profile travel companies waiting to have similar appeals heard before the Tax Tribunal. As with Hotels4U, all hearings will focus on whether they operate as an agent according to the principles established by the Supreme Court in the Secret Hotels2 case.
Hotels4U was the first of these to be heard, with the court’s decision to rule in its favour likely to be welcome news for the industry.
One leading travel lawyer told TTG that in circumstances where HMRC is defeated, it intends to make an application for the tribunal to refer the matter to the Court of Justice of the European Union (CJEU), to establish whether as a matter of EU law, the outcome should be different. It is understood that the travel companies involved will vigorously contest any such application.
A Thomas Cook spokesperson said: “We are pleased to get this clarity from the tribunal.”
An HMRC spokesperson said the organisation was currently considering the decision and its implications.
