Travel industry celebrates VAT victory

The Court, in a case involving First Choice Holidays, upheld a previous VAT tribunal ruling that package holiday discounts granted to customers by travel agents can be deducted from the tour operator’s turnover for VAT purposes.

Customs & Excise took the position that VAT should be calculated according to the holiday price advertised in a brochure and that the actual price payable by the customer should be disregarded.

Director of KPMG’s travel industry VAT team Chris Fyles, who advised First Choice Holidays, said: ‘This is a decisive judgement which should clear the way for tour operators to receive funds for the VAT they have overpaid. Moreover, the ruling will have no impact on the VAT position of travel agents – since the agency commission VAT calculation will be unchanged.

‘Subject to the outcome of the appeal action by Customs, those operators who have lodged retrospective refund claims should now be able to look forward to a repayment of the VAT involved.’

The challenge to the Customs ruling was mounted by First Choice with support of rivals Airtours, Thomas Cook and Thomson Travel.

Related reading