TOUR operators are likely to receive an estimated £20m VAT refund following a landmark legal victory against the Government.
First Choice, backed by Thomson, Airtours and Thomas Cook, argued before a VAT tribunal that operators were being wrongly charged VAT on the brochure price of a holiday.
They insisted that it should only be charged on the actual selling price, which is often lower than the brochure rate due to package holiday discounts granted by travel agents (Travel Weekly October 18).
The UK’s big four operators are likely to receive refunds of £2m-£4m in overpaid VAT dating back four years, according to First Choice’s financial adviser KPMG.
Smaller operators are likely to make claims totalling further millions of pounds.
KPMG’s travel industry VAT team director, Chris Fyles, said: “Many operators have lodged claims in advance of this ruling and any who have not we advise to do so immediately.”
Fyles said that at present many agents grant holiday discounts without the knowledge of operators, but now the system would have to change so price reductions could be factored into any VAT calculations.