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Tax office to chase Med Hotels for GBP7m VAT bill
The UK tax office today confirmed it has applied for leave to appeal against a ruling which absolved bed bank Med Hotels of liability for VAT.
Its decision to chase the accommodation provider for £7 million will send a warning to other bed banks who might have thought they were in the clear earlier this year when an Upper Tribunal in the Royal Courts of Justice overturned a previous ruling that Med Hotels was liable for the unpaid VAT under the Tour Operators' Margin Scheme.
A spokesman for Her Majesty's Revenue and Customs (HMRC) said today: "I can confirm that we are seeking leave to appeal that decision. We are going to pursue this matter."
HMRC believes that Med Hotels was acting as a principle between 2004 and 2007 when it was owned by Lastminute.com. In its earlier appeal, Med Hotels successfully argued that it was acting as an agent.
However, tax experts warned bed banks that any celebrations following Med Hotel's court victory in June could be short-lived as there was a strong possibility HMRC would appeal.
Speaking to TravelMole immediately following the earlier decision, indirect tax director at KPMG Alan McLintock also warned that HMRC may push more aggressively for a review of TOMS at EU level.
The tax office appeal could take several months and a final decision on the Med Hotels case is unlikely before 2013. The bed bank is now owned by Thomas Cook.
By Linsey McNeill
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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