ABTA has updated its guidance on the legal and tax status of agents and principals following the recent Supreme Court judgement on Medhotels.
The court supported the argument of the online bed bank that it had been acting as agent and was therefore not subject to VAT under the Tour Operators Margin Scheme.
It agreed that Medhotels was acting as agent for accommodation providers, because it had clear contracts in place with accommodation providers and clients naming it as an agent, and because the way it ran its business wasn’t inconsistent with these contracts.
Simon Bunce ABTA head of legal services, said: "The Supreme court judgement in favour of Medhotels is very significant as it recognises that some types of commercial behaviour that might traditionally have been indicative of a principal trading status might perfectly legitimately be adopted by an agent, without changing their legal or tax status.
"At the heart of the decision is the need for businesses to ensure they have the correct contracts and paperwork in place, whether a principal or an agent
"We would strongly recommend that ABTA members review our revised guidance note and if required take additional legal advice to ensure that there is no ambiguity regarding their agency or principal status."
