The UK tax office, HM Revenue and Customs (HMRC), wants the European Court of Justice (ECJ) to overturn a decision of the UK’s highest court so it can target accommodation suppliers and online travel agents (OTAs) for multi-million pounds in TOMS VAT payments.
HMRC is looking to the First-Tier Tribunal (Tax) to refer to the ECJ claims for VAT under the Tour Operator’s Margins Scheme (TOMS) against five companies.
A two-day hearing is scheduled for November 12.
Should HMRC succeed and then win in Europe, the bill for outstanding TOMS payments would be worth “many millions”, according to VAT specialist David Bennett of Elman Wall Bennett.
It could threaten many UK firms’ survival, with Bennett saying: “It’s common that companies rely on this [income].”
HMRC has not given up hope of a TOMS bonanza despite losing a landmark claim against Secret Hotels 2 (formerly Med Hotels) in the UK’s Supreme Court in 2014.
This established that bed banks and similar businesses which contract with suppliers as agents sit outside the TOMS regime.
The UK tax office has lost another five TOMS cases in the First-tier Tribunal in the past two years – against Hotels4U, Opodo, LowCost Holidays, HotelConnect and Alpha Rooms – after refusing to repay multimillion-pound sums it collected before the 2014 ruling.
Two of the cases – HotelConnect and LowCost – involve claims for repayment brought by liquidators.
But in its arguments to the Tribunal, HMRC sought an ECJ referral which the Tribunal agreed to consider later. It’s this that will be heard in November.
Bennett said: “HMRC is looking to negate the effect of that [Supreme Court] decision. It finds it hard to accept.”
He explained: “VAT is an EU tax. Without it, anyone selling travel would be subject to VAT in every member state they sell travel to [because] accommodation is taxable in the country where the accommodation is.
Bennett considers it “unlikely” HMRC will succeed, saying: “The Supreme Court gave such a strong judgment.” But he warned: “It’s still in the balance.”