Medhotels ‘likely to lose’ VAT tribunal

Medhotels is expected to lose its tribunal against an £11 million VAT bill, sparking a rash of similar investigations into travel firms’ finances.

Andrew Burnham, principal accountant at MacIntyre Hudson, said he did not expect Medhotels to win the case or have enough grounds to appeal. A decision is expected within days.

Burnham warned that HM Revenue and Customs was determined to bring more travel companies claiming to act as agents into the Tour Operators’ Margin Scheme (Toms).

He said customs had been gathering intelligence on various online agencies.  “If you say you are an agent, you must be able to support this,” he said.

The wider spread of Toms will squeeze companies’ already thin margins. “This is a further attack on margins at an already challenging time.

“Many firms survive on a thin margin and their whole model is based on volume. If they are going to lose 17.5% of their margin that’s a lot of money. We’ve already seen the start of the consolidation trend; now you’ve got to be bigger to survive.”

Even if Medhotels is victorious, customs will still be determined to squeeze more tax out of travel. “Now they have acted, they’ve got the smell of blood. They will take another company to tribunal or at least raise assessments.”

Burnham advised travel companies acting as agents to review their exposure and tighten up their procedures. “HMRC has been waiting patiently to act. The trade should be aware that custom has it in their sites.”

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