Secret Hotels2: agent or principal?

HMRC has won a significant decision against the taxpayer in Secret Hotels2 Ltd (formerly Medhotels) [2012] EWCA Civ 157. The Court of Appeal has upheld HMRC’s appeal restoring the decision of the First-tier Tribunal (FTT) which concluded that the taxpayer was acting as principal in relation to the provision of hotel accommodation.

Background

Medhotels operated a website through which it marketed accommodation. Customers (travel agents or holidaymakers) would book and directly pay Medhotels for the accommodation. The price paid by the customers was set by Medhotels. Medhotels had agreed to purchase the accommodation at a lower ‘net rate’ from the hotels and...