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Medhotels to take legal battle to highest court in UK
Medhotels has won the right to have its case against the taxman heard by the highest court in the UK.
Travlaw said today that the Supreme Court had agreed to hear the long-running dispute between MedHotels and Her Majesty’s Revenue and Customs.
HMRC won the last round in the battle in December 2012 when the Court of Appeal over-ruled an earlier decision by the Upper Tribunal and ordered Medhotels to pay £7 million VAT for the period from 2004 to 2007, when it was owned by lastminute.com.
The Court of Appeal ruled that the bed bank, now owned by Thomas Cook, was trading as a principle, not an agent, and was therefore liable to pay VAT under the Tour Operators Margin Scheme.
It said that regardless of the type of contract Med Hotels (which later changed its name to Secret Hotels) and similar online travel agencies and bed banks have with hoteliers, if they are seen to be acting as principals rather than intermediaries they will have to pay 20% VAT on the profit they make on the sale of accommodation.
However, Travlaw said the travel industry can expect "much clearer guidance" on the issue of when TOMS is payable and what companies have to do to successfully claim they are trading as an agent, not a principle.
" We are proud to say that Travlaw has had a hand in this matter, as we intervened at the Supreme Court on behalf of a number of our clients who were keen to persuade the Court that it was important for the industry to have these issues clarified."
Travlaw is not acting on behalf of Medhotels but it said it was acting on behalf of a number of companies who instructed its lawyers to intervene at the Supreme Court to persuade it to consider the case in support of Medhotels.
If the ruling goes against the bed bank, several other businesses – including some retailers who put together their own packages – could also be liable for TOMS.
The case is not expected to be heard until the end of the summer, at the earliest.
Linsey McNeill
Editor Linsey McNeill has been writing about travel for more than three decades. Bylines include The Times, Telegraph, Observer, Guardian and Which? plus the South China Morning Post. She also shares insider tips on thetraveljournalist.co.uk
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