HMRC v Secret Hotels2

In HMRC v Secret Hotels2 ([2014] UKSC 16) HMRC’s unsuccessful appeal concerned the liability to VAT of Secret Hotels which arranged holiday accommodation through an online website. The decision focused on hotel rooms. Hoteliers would enter into an ‘accommodation agreement’ with Secret Hotels for the marketing of their rooms on the website. Customers (both travel agents and holidaymakers) would book a hotel on the site and pay the whole amount of the booking. Secret Hotels would then pay a lower amount to the hotelier.

The issue was the VAT liability of Secret Hotels in respect of the supply of hotel accommodation. HMRC sought to apply the tour operators’ margin scheme (TOMS) to Secret Hotels on the basis that it was a travel agent acting as principal (under the Sixth VAT Directive art 306.1(a)). This would have meant that Secret Hotels was taxable in...