Med Hotels loses £7m VAT battle

Med Hotels has lost its appeal against a £7 million VAT bill, in a case which will have huge implications for the sector.

The bed bank, which was owned by during the period in question, fought Her Majesty’s Revenue and Customs over the VAT claim at a tribunal in November 2009.

HMRC claimed the bed bank was liable to pay VAT under the Tour Operators’ Margin Scheme (Toms).

However, argued that Med Hotels was acting as an agent and was therefore not required to pay Toms.

The judgment, released today, stated that the “Appelant” [Lastminute] “was not simply supplying agency services to the hotels, but was itself supplying the holiday”.

Although Med Hotels is likely to appeal the decision, the defeat is likely to spark a rash of similar investigations by HMRC into travel firms’ finances.

It is widely acknowledged that customs is already determined to bring more travel companies claiming to act as agents into the Toms scheme.

White Hart Associates partner Chris Photi said the decision could cost the industry up to £300 million.

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