Revenue victory over tourism industry VAT
Travel agents are likely to face increased tax bills on their commission after HMRC won a Court of Appeal case about a £7m VAT bill for hotel accommodation.
The court ruled in favour of HMRC in the case of Secret Hotels (Medhotels), overturning a decision last year by the upper tribunal. Experts say the decision will have a big effect on the travel industry.
Medhotels, previously named ‘Secret Hotels 2’ before it was acquired by Thomas Cook, argued that if it sells accommodation to a traveller through its website or via third party travel agents, the agency commission falls outside the scope of UK VAT under the Tour Operators’ Margin Scheme (TOMS).