Revenue and Customs v Secret Hotels2 Ltd: SC 5 Mar 2014

The Court was asked as to: ‘the liability for Value Added Tax of a company which markets and arranges holiday accommodation through an on-line website. The outcome turns on the appropriate characterisation of the relationship between the company, the operators of the hotels, and the holiday-makers or their travel agents (which is an English law issue), and the impact of certain provisions of the relevant EU Directive on that relationship once it has been characterised (which is an EU law issue).
Held: The appeal of the taxpayer was successful. The correct legal analysis of the tripartite relationship between Med, hoteliers and customers was that Med marketed and sold hotel accommodation to customers as the agent of the hoteliers and was in these circumstances acting solely as an intermediary for VAT purposes.
Article 306 created two categories of travel agent, namely (a) those ‘who deal with customers in their own name and use supplies of goods or services provided by other taxable persons, in the provision of travel facilities’ and (b) those who ‘act solely as intermediaries’ (referred to for convenience as, respectively, ‘ article 306.1(a) ‘ and ‘ article 306.1(b)’), and provides for a special VAT scheme for transactions carried out by travel agents who fall within article 306.1(a). Med had been acting as an intermediary and not in its own name, and therefore fell within the provisions of article 306.1(b).
When assessing the VAT consequences of a particular contractual arrangement, the court should, at least normally, characterise the relationships by reference to the contracts and then consider whether that characterisation is vitiated by any relevant facts.
Lord Neuberger PSC said: ‘When interpreting an agreement, the court must have regard to the words used, to the provisions of the agreement as a whole, to the surrounding circumstances insofar as they are known to both parties, and to commercial common sense.’

Lord Neuberger, President, Lord Sumption, Lord Reed, Lord Hughes, Lord Hodge
[2014] UKSC 16, [2014] BVC 9, [2014] 2 All ER 685, [2014] STI 864, [2014] STC 937, UKSC 2013/0036
Bailii, Bailii Summary, SC, SC Summary
Directive 2006/112/EC 2.1(c)
England and Wales
At CASecret Hotels2 Ltd v Revenue and Customs CA 3-Dec-2012
The Revenue appealed from a finding at the UTTC that the taxpayer company had acted not as a principal but rather as an agent.
Held: Morgan J was wrong to criticise the FTT for looking at ‘the whole facts of the case’ as opposed to . .
At FTTTxSecret Hotels2 Ltd (Formerly Med Hotels Ltd) v Revenue and Customs FTTTx 15-Mar-2010
FTTTx Value Added Tax – Whether supplies of hotel and other holiday accommodation made by Appellant as agent for accommodation suppliers or as principal.
Value Added Tax – If Appellant is principal whether . .
At UTTCSecrets Hotels2 Limited UTTC 29-Jul-2011
Value Added Tax – written agreements to provide hotel accommodation to holidaymakers – identity of supplier – was it hotel operator or company operating a bookings website – principles as to construction of written agreements – no difference because . .
CitedF L Schuler AG v Wickman Machine Tools Sales Limited HL 4-Apr-1973
The parties entered an agreement to distribute and sell goods in the UK. They disagreed as to the meaning of a term governing the termination of the distributorship.
Held: The court can not take into account the post-contractual conduct or . .
CitedVan Ginkel Waddinxveen v Inspecteur der Omzetbelasting ECJ 12-Nov-1992
(Judgment) Article 26 of Directive 77/388: Sixth Directive, which concerns the special scheme applicable to travel agents in the matter of imposition of value added tax, must be interpreted as meaning that the fact that the transport of the . .
CitedCommissioners of Customs and Excise v Madgett and Baldwin (trading as Howden Court Hotel) ECJ 22-Oct-1998
The court considered the criteria for determining whether the provision to guests by a hotelier of travel services (and in particular transport to and from the hotel and excursions) constituted supply which was ancillary to the supply of . .
CitedMercantile International Group Plc v Chuan Soon Huat Industrial Group Ltd CA 8-Mar-2002
The court was asked whether the claimants were a commercial agent of the defendants under the 1993 regulations.
Held: It is common for agents acting in the sale of financial products, eg many types of insurance policies, to fix its own . .
CitedHalifax plc etc v Commissioners of Customs and Excise ECJ 21-Feb-2006
ECJ Sixth VAT Directive – Article 2(1), Article 4(1) and (2), Article 5(1) and Article 6(1) – Economic activity – Supplies of goods – Supplies of services – Abusive practice – Transactions designed solely to . .
CitedA1 Lofts Ltd v Revenue and Customs ChD 30-Oct-2009
Lewison J said: ‘The court is often called upon to decide whether a written contract falls within a particular legal description. In so doing the court will identify the rights and obligations of the parties as a matter of construction of the . .
CitedCommissioners for Her Majesty’s Revenue and Customs v RBS Deutschland Holdings ECJ 22-Dec-2010
ECJ Sixth VAT Directive – Right to deduction – Purchase of vehicles and use for leasing transactions – Differences between the tax regimes of two Member States – Prohibition of abusive practices
‘taxable . .
CitedHenfling, Davin, Tanghe ECJ 14-Jul-2011
ECJ Taxation – Sixth VAT Directive – Article 6(4) – Exemption – Article 13(B)(f) – Gambling – Services provided by a commission agent ‘buraliste’ acting in his own name but on behalf of a principal operating a . .
CitedRevenue and Customs v Aimia Coalition Loyalty UK Ltd SC 13-Mar-2013
The company managed a card loyalty scheme for retailers. The Revenue appealed against a decision that the company could reclaim VAT input tax on the goods purchased on the customers redeeming their points. The ECJ had decided that the service . .
CitedRevenue And Customs v Newey ECJ 20-Jun-2013
ECJ Reference for a preliminary ruling – Sixth VAT Directive – Article 2(1) and Article 6(1) – Meaning of ‘supply of services’ – Supply of advertising and loan broking services – Exemptions – Economic and . .
At FTTTxSecret Hotels2 Ltd (Formerly Med Hotels Ltd) v Revenue and Customs FTTTx 15-Mar-2010
FTTTx Value Added Tax – Whether supplies of hotel and other holiday accommodation made by Appellant as agent for accommodation suppliers or as principal.
Value Added Tax – If Appellant is principal whether . .

Cited by:
CitedAirtours Holidays Transport Ltd v Revenue and Customs SC 11-May-2016
The court was asked whether the appellant, Airtours Holidays Transport Ltd (formerly MyTravel Group plc), was entitled to recover, by way of input tax VAT charged by PricewaterhouseCoopers LLP in respect of services provided by PwC and paid for by . .
CitedUber Bv and Others v Aslam and Others CA 19-Dec-2018
Uber drivers are workers
The claimant Uber drivers sought the status of workers, allowing them to claim the associated statutory employment benefits. The company now appealed from a finding that they were workers.
Held: The appeal failed (Underhill LJ dissenting) The . .
CitedUber Bv v Aslam and Others (Jurisdictional Points – Worker, Employee or Neither : Working Time Regulations) EAT 10-Nov-2017
Uber drivers are workers
JURISDICTIONAL POINTS – Worker, employee or neither
‘Worker status’ – section 230(3)(b) Employment Rights Act 1996 (‘ERA’), regulation 36(1) Working Time Regulations 1998 (‘WTR’) and section 54(3) . .
CitedLehman Brothers International (Europe) v Exotix Partners Llp ChD 9-Sep-2019
The parties had contracted to trade global depository notes issued by the Peruvian government. Each made mistakes as to their true value, thinking them scraps worth a few thousand dollars, whereas their true value was over $8m. On the defendant . .
CitedUber Bv and Others v Aslam and Others SC 19-Feb-2021
Smartphone App Contractors were as Workers
The court was asked whether the employment tribunal was entitled to find that drivers whose work was arranged through Uber’s smartphone application work for Uber under workers’ contracts and so qualify for the national minimum wage, paid annual . .

Lists of cited by and citing cases may be incomplete.

VAT, European, Contract

Leading Case

Updated: 02 November 2021; Ref: scu.521994