£20m VAT saving for travel industry

In a dispute involving Customs & Excise, the tribunal ruled that the Kingston-upon-Thames-based tour operator could wait until the end of the year before choosing the most ‘favourable means’ to calculate its VAT.

This followed Simply Travel’s application to Customs to change the way it calculated VAT for the financial year 1997/98. Under the Tour Operators’ Margin Scheme, a 1995 VAT treatment for tour operators working across Europe, VAT can be calculated using two different methods.

Customs refused Simply Travel’s application, saying an application to change the method of calculating VAT had to be made at the start of the financial year. The VAT tribunal ruled Simply Travel had the right to make the choice at year-end as long as the decision was taken before the VAT return was made.

The saving for Simply Travel works out at £37,000, but according to Alun Mathias, director of VAT services at Deloitte & Touche Cardiff, this could be an annual saving of £20m across the industry.

‘The large players could be looking at hundreds of thousands [of pounds] each,’ Mathias added.

He said Customs may challenge the ruling, given the amount of revenue it could lose, but this would be a matter for ‘a High Court judge to decide’.

A spokesman for Customs confirmed that an appeal had been submitted to the High Court. ‘A hearing is expected sometime in October or November,’ he said.


Travel industry celebrates VAT victory

Simply Travel

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