The Upper Tier Tax Tribunal has refused the UK tax office leave to appeal its recent ruling in the Med Hotels case which absolved the accommodation provider of liability for VAT.
Revenue & Customs (HMRC) has now sought leave to appeal direct to the Court of Appeal.
The rejection by the Upper Tier Tax Tribunal was expected in light of the judge’s ruling in July, which overturned a Lower Tier Tribunal finding that Med Hotels was liable for £7 million in unpaid VAT.
The first tribunal judged the bed bank to have acted as a supplier rather than an agent during the period 2004-07, a ruling which left other bed banks – and potentially other agents – liable to VAT demands. According to one industry accountant: “All the industry’s bed banks had been visited [by HMRC] over the previous 18 months.”
However, the Upper Tier Tax Tribunal judge found: “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 Med Hotels brand is now owned by Thomas Cook, but the tax liability applied to former owner lastminute.com and parent company Sabre Holdings.