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Lastminute could escape £7m VAT bill

Lastminute.com is thought unlikely to have to pay a penny in tax to the taxman despite losing a £7 million VAT tribunal case last week.


Documents lodged with Companies House have revealed that Secret Hotels2 (formerly Med Hotels Ltd), the company fighting the VAT tax claim, has no assets.


Lastminute sold the assets of Med Hotels to Thomas Cook in January last year, renaming the company Secret Hotels2.


This company’s latest accounts contain no provision for any tax liability and revealed Secret Hotels2 made a net loss after tax of £13.4 million in the year to December 31, 2008.


Observers said if lastminute was unable to overturn the ruling that it is liable to pay Tour Operators’ Margin Scheme VAT for December 2004 to June 2007, it was likely to liquidate the company.


“Sabre [lastminute’s parent firm] has cleared the company out of cash,” one source said.


Other bed banks have been warned they might not be quite as in the clear as they had hoped following the tribunal ruling.


Her Majesty’s Revenue & Customs’ (HMRC) case hinged on whether Med Hotels was acting as an agent for overseas hotels, as it claimed, or whether it was, in fact, the principal and liable for Toms.


Damon Wright, VAT expert at Grant Thornton, said he doubted if any bed bank could “truly defend themselves against the findings of this decision if it stands”.


“The tribunal based its judgment on the fact that the core contractual position between the supplier and Med Hotels did not truly recognise that Med Hotels was the agent of the supplier,” he said.


Chris Photi, partner at White Hart Associates, said a small number of bed banks had “golden letters” from HMRC endorsing their agency status and were “in a better position”.


Photi added it was possible to enter a flexible commission agreement with overseas hoteliers as an agent, but that meant the supplier must pay VAT on the mark-up.








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