HM Revenue and Customs has won the right to take the MedHotels case to the Court of Appeal, throwing fresh doubt on accommodation providers’ liability for VAT under the Tour Operators’ Margin Scheme (Toms).
The Court of Appeal granted HMRC permission to appeal today, re-opening a case that centres on whether bed bank MedHotels operated as an agent or principal.
An Upper Tier Tax Tribunal had previously refused the tax office leave to appeal after overturning an earlier, Lower Tribunal decision that MedHotels was liable for £7 million in unpaid VAT.
The Upper Tribunal, presided over by a High Court judge, ruled MedHotels' paperwork and agreements with hoteliers meant it had been acting as an agent and was therefore not liable for VAT on its margin for the period 2004-07. The Lower Tribunal had accepted HMRC’s argument that MedHotels operated as a principal, not an agent.
The appeal is expected to be heard in the summer, with a decision by the end of 2012 or early 2013.
Tax specialist Damon Wright, associate director of Grant Thornton accountants, described the decision as “disappointing”.
Wright said: “The Upper Tier Tax Tribunal chairman did his best to make the case so clear as to prevent a right of appeal. But when there is such diversity between tribunal decisions, it’s not unheard of for the Court of Appeal to say ‘there is enough doubt to look at it again’.”
An appeal may only proceed on a question of how the law was applied by the Upper Tier Tribunal.
Wright said: “We won’t know the grounds for the appeal until we see the submissions, but it is likely to be around whether there is sufficient doubt [about how MedHotels operated] to take other considerations into account.”
The bed bank, formerly owned by lastminute.com, was sold to Thomas Cook in 2009.
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