The UK tax office has applied for leave to appeal against the recent ruling in the Med Hotels case which absolved the accommodation provider of liability for VAT.
Revenue & Customs (HMRC) lodged the appeal at the end of last week. Its decision will bring renewed uncertainty to the bed-bank sector, with up to 20 companies facing provisional VAT demands.
HMRC will seek leave to appeal from the judge who presided over the recent hearing and, if it fails, seek permission direct from the Court of Appeal.
The latter could take up to eight months to reach a decision and an appeal hearing might be another year away, extending the uncertainty into 2013.
An Upper Tribunal hearing in the Royal Courts of Justice in June overturned a previous ruling that found Med Hotels, being represented under the name Secret Hotels, liable for £7 million of unpaid VAT.
It is considered unlikely the Upper Tribunal judge would allow an appeal, given his finding – published at the end of July – was that: “None of the matters stressed by the [original] Tribunal . . . allows me to ignore the clear provisions in the agreements between Med Hotels and the hotel operators.”
The original decision had left Med Hotels’ former owner lastminute.com and parent company Sabre Holdings with a VAT bill for £7 million after the bed bank was judged to have acted as a supplier rather than as an agent during 2004-07. It also left other bed banks – and potentially other companies acting as agents – at risk of VAT demands.
The Med Hotels brand is now owned by Thomas Cook but the liability for the tax remained with lastminute.com.
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