Abta has updated its guidance on the legal and tax status of agents and principals following the recent Supreme Court judgement on Medhotels which found in favour of the online bed bank.

The ruling supported the bed bank’s argument that it had been acting as agent and was therefore not subject to VAT under the Tour Operators Margin Scheme (Toms). 

The Supreme Court agreed that Medhotels was acting as agent for the accommodation providers, because they had clear contracts in place with accommodation providers and their clients naming them as an agent, and the way they ran their business was not inconsistent with these contracts.

Simon Bunce, Abta head of legal and member services said: “The Supreme court judgement in favour of Medhotels is very significant as it recognises that some types of commercial behaviour that might traditionally have been indicative of a principal trading status might perfectly legitimately be adopted by an agent, without changing their legal or tax status. 

“At the heart of the decision is the need for businesses to ensure they have the correct contracts and paperwork in place, whether a principal or an agent. We would strongly recommend that Abta members review our revised guidance note and if required take additional legal advice to ensure that there is no ambiguity regarding their agency or principal status.”

The Abta guidance note, ‘Agent or Principal: how does your business trade?’, is available to Abta Members on www.abta.com

Read Simon Bunce’s comment here