The Inland Revenue could force bed banks acting as agents to foot VAT bills that rivals with principal status already have to pay, it has been claimed.
Currently, bed banks can avoid VAT payments by acting as agents rather than as principals.
However, it is understood the Inland Revenue is reviewing the current set-up, and could even demand payments going back as far as five years from bed banks that act as agents.
Youtravel.com is one of the few bed banks that still has principal status.
Speaking at World Travel Market, chief executive John Kent said he had written to the Inland Revenue for clarification before it makes its decision on whether or not to drop principal status.
If there is no action, Kent admitted the bed bank would “probably” ditch principal status before the end of the year.
“We are not sure yet but it’s most likely we will drop it. It has to be an even playing field,” he said.
The bed bank has complained it has been at a competitive disadvantage as a bed bank with principal status and posted a £900,000 loss in its first year. It originally adopted principal status because of demands by agents.
The bed bank now claims it will make a pre-tax profit of at least 500,000 euros for its second year of trading, ending October 31 2008. Earlier last month, the bed bank said it was on target to to break even. Turnover for the second year is expected to be 113 million euros to 114 million euros.
Kent said: “We were conservative with our figures but we are now close to half a million euros in the black. We are extremely pleased given the market circumstances this year.”
He added that, if the bed bank did not have principal status, its profits would be nearer 1.5 million euros.
Meanwhile, the bed bank has launched its new city breaks programme with three partner suppliers to offer more than 3,000 city hotels in 250 destinations, including Europe and long-haul destinations such as Cape Town, Bangkok, Hong Kong and New York.
It said it has secured short release periods in order to allow it to pull out of allocations at much later notice than usually allowed.
*More WTM 2008 coverage at travelweekly.co.uk/wtm2008