has successfully overturned a ruling that its former bed bank Med Hotels was liable to pay £7 million in VAT under the Tour Operators’ Margin Scheme.

The trade supplier faced the tax bill following a previous rulling from Her Majesty’s Revenue and Customs that it was acting as a principal in the period under dispute between 2004 and 2007.

Med Hotels was subsequently acquired by Thomas Cook, but the potential liability for the tax remained with

Details of the judgment have not yet been made public but Travel Weekly understands a previous tax tribunal ruling has been overturned and has been awarded costs.

A spokesman for the online travel firm said: “Everyone at is delighted with today’s outcome in our favour and believe the right decision was made.”

The ruling, following a two-day tribunal appeal at the Royal Courts of Justice in London at the end of June, will be seen as a landmark decision for the travel industry.

Since the original tribunal decision, around 20 travel companies trading in a similar way are known to have received similar VAT demands from HMRC’s compliance unit.

Tax officials were said to have the travel industry in their sights, with accommodation suppliers thought to be just the first to have their business models examined for VAT liability.