On Holiday Group founder Steve Endacott claims his company was “destroyed” because HM Revenue and Customs (HMRC) was withholding £4.5 million of disputed Toms VAT.
The chief executive of the trade supplier said this left it unable to pay hoteliers and with no choice but to cease trading.
Efforts to sell On Holiday Group, which incorporated bed bank Holiday Brokers and employed 65 people, as a going concern were unsuccessful.
“We have had extensive and detailed discussions over the last six months with a number of interested parties.
“However, all deals have floundered because of the £4.5m VAT dispute and its inherent risks. We would have liked to resurrect these discussions, but we have run out of time,” said Endacott.
Endacott called the timing of Wednesday’s Medhotels’ victory against HMRC in a £7 million VAT case “ironic and maddening”.
He said: “We are obviously glad that it gives a virtually guaranteed £4.5 million payout to our hotel partners; however it is likely that this will take a further six to nine months to secure from HMRC and we have had legal advice that we cannot trade until this point, without going into administration.
“I am outraged that HMRC has been able to take £4.5 million of disputed VAT charges on a ‘guilty until proven innocent basis’ and it has taken a ridiculous four years to receive a Supreme Court ruling that ratifies all our legal advice that we were acting correctly as the agent of the hotelier and HMRC was wrong in its stance.”
Endacott said HMRC withholding £4.5 million forced it to stop selling eurozone hotels and removed the working capital required to effectively operate the bed bank.
He added: “We are obviously exploring the potential for a damages claim, but our lawyers advise it is very hard to secure damages against HMRC who seem to have virtually unlimited rights when you are in a VAT reclaim position.
“We have been forced to take the decision to put the company into administration due to pressure from hoteliers to make payments, which OHG cannot do without the return of the £4.5m held by HMRC.
“Not surprisingly our hotel partners are not willing to wait up to another nine months to receive payment.”