Sabre Holdings has welcomed the decision in the Royal Courts of Justice to overturn a ruling that accommodation provider Med Hotels was liable for VAT.
Mr Justice Morgan found the earlier ruling had given insufficient regard to the written contracts between the bed bank, one of the leading suppliers to online travel agents in the UK, and hotel operators.
Med Hotels appealed after a First-Tier Tribunal found it liable for £7 million VAT on the grounds it had acted as an accommodation supplier, or principal, rather than an agent.
In his judgment, Mr Justice Morgan found: “None of the matters stressed by the Tribunal . . . allows me to ignore the clear provisions in the agreements between Med Hotels and the hotel operators.”
Med Hotels was part of Sabre-owned Lastminute.com for much of the period UK Revenue and Customs (HMRC) argued the company owed VAT. The bed bank was subsequently sold to Thomas Cook.
Lastminute.com legal counsel Iain Lindsay, senior vice-president of Sabre Europe management services, said: “We genuinely believed Med Hotels was an agent. That was how it was set up and handled business. This has reaffirmed what we believed to be the case.
“The decision has restored the balance in recognising what a travel agent does. It is recognition of the changing role of travel agents and allows the industry to take a more pragmatic and robust approach to carrying out its duties.”
Lindsay added: “It is a robust, well-argued judgment.”
HMRC is understood to be considering whether to appeal.