The UK Supreme Court has granted a hearing in January to Secret Hotels2, formerly MedHotels, and its appeal in a long-running VAT case.
Travel Weekly reported in May that the Supreme Court would hear the case following the defeat of Secret Hotels2 in the Court of Appeal last December.
The defeat left the bed bank with a £7-million bill for VAT under the Tour Operator’s Margin Scheme (Toms).
The Supreme Court has scheduled the hearing for January 29.
The case stems from a period during 2004-07 when Medhotels was owned by Lastminute.com and found to have been acting as a principal and therefore liable for VAT under Toms.
The Court of Appeal upheld a challenge brought by HM Revenue and Customs (HMRC) against an Upper Tier Tribunal decision in favour of the company, which in turn had overthrown a decision by a lower-tier tribunal.
McIntyre Hudson director of VAT services Damon Wright described the Court of Appeal decision as one which the taxman “won hands down”.
David Bennett, VAT partner at accountants Saffery Champness told an Abta travel law seminar in June: “It is unlikely the Supreme Court will move far from the decision.”
However, Bennett suggested travel agents have little to fear from the current ruling.
He told the seminar: “The Court of Appeal decided Medhotels imposed obligations on hotels and was not a true agent.
“The decision set out a list of features in determining whether a business is acting as agent or principal.
“Contracts are not the end of the story. A company’s behaviour is crucial. Who sets the price? Who sets the terms for cancellation, for payments, for amendments?”
Bennett added: “Her Majesty’s Revenue and Customs (HMRC) is now busy applying the Court of Appeal decision.”
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