In the News: EW Bennett on OHG vs HMRC

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The article below is taken from TTG, written on 20 Jan by Patrick Whyte

OHG liquidators headed for legal showdown with HMRC

The liquidators of On Holiday Group, which famously collapsed almost two years ago, are pursuing legal action against HM Revenue & Customs, in what is likely to be one of several travel VAT cases this year.

SHARELINES

Taxman set to push more cases as OHG heads for legal showdown

TTG has learned that Daly & Co is seeking to recover £2.7 million in disputed VAT from HMRC and has commenced tax tribunal proceedings.

According to the recently published liquidator’s progress report, subsidiary OHG Accommodation Ltd is one of a number of companies still waiting for payment from HMRC following 2014’s landmark Medhotels Supreme Court decision.

Daly & Co’s decision to pursue HMRC is likely to be one of a number of cases heard this year, with VAT experts confirming to TTG that others are also waiting in the wings.

Last year, following a Freedom of Information request submitted by TTG, HMRC admitted that there were eight similar cases.

Initially those in dispute had been in limbo and were forced to wait for the outcome of the Medhotels hearing, which centred on whether it was acting as an agent or principal.

There had been an expectation that once this was resolved they would be repaid. “I think HMRC is trying to argue in each case that the circumstances are different to those of Medhotels,” said David Bennett, a director at Elman Wall Bennett.

“We all thought back in March two years ago when the decision came out that that should be the end of the matter. But of course it’s not.”

Bennett is working on a case that he expects will be heard this year. He added: “Of course it’s fair to say that when HMRC was winning the Medhotels case it was emphasising how similar our case was and now all of a sudden it’s very different.”

Stuart Walsh, a partner at law firm Pinsent Masons, who is also working on travel cases, said that rather than pay back the disputed VAT, HMRC had decided to have “another roll of the dice before the tax tribunal”.

“Unfortunately for these businesses [still fighting for repayment] there’s no mechanism by which they can compel HMRC to make payment,” he said.

“They’re stuck between a rock and a hard place in the sense that they have to find themselves before the tax tribunal to get this determination that they are in fact [an] agent and not acting as principal.”

Both Lowcostbeds and Alpharooms are understood to still be battling to recover VAT from HMRC.

An HMRC spokesperson said: “It is only right that we do not repay any claims until we are satisfied that the money is due.

“We consider each case on its own merits. Where we agree that companies’ arrangements are the same as those in the Supreme Court judgment in the case of Secret Hotels2 Limited, HMRC will and has resolved companies’ claims.”

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