Secret Hotels2 Ltd (formerly Med Hotels Ltd) v Commissioners for Her Majesty's Revenue and Customs
Decision date: 15 March 2010
Neutral citation: [2010] UKFTT 120 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This appeal concerned whether Secret Hotels2 Ltd acted as principal or as a disclosed agent when selling hotel accommodation via medhotels.com for periods 12/04–06/07, and if principal, whether onward supplies to travel agents were wholesale and outside TOMS. The Tribunal found on the factual matrix that Secret Hotels2 acted as principal, not merely agent, and rejected the alternative wholesale/TOMS exemption argument. The appeal was dismissed and HMRC awarded costs.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: medium
The Tribunal’s dispositive reasoning was that the factual substance and overall conduct, not labels in contracts, determine VAT characterisation; indicia of principal status included receipt of payments into the appellant’s account, retention of deposits/interest, setting resale prices/commission without passing full receipts to hotels, paying hotels net amounts, and exercising commercial control (eg handling compensation). Where an intermediary does not put the supplier in a position to account for VAT on the full price, that supports treating the intermediary as the principal for VAT purposes.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal observed that consumer‑facing statements or contractual descriptions of agency may be contradicted by commercial reality and therefore insufficient alone to establish agency; and that while agents may commingle funds, failure to account to the principal for sums received may point to principal treatment for VAT. It also noted various practical arrangements (handling agents, in‑resort services, advances to hotels) are relevant to classification though not determinative.