23 Jan

VAT on travel agent discounts

The Court of Justice of the European Union (CJEU) gave its decision last week in the Ibero Tours case involving the VAT effect of the discounting of a holiday by a travel agent. Ibero (a German travel agent) argued that it should receive a VAT refund when discounting a tour operator’s holiday.

The German court referred the matter to the CJEU. Last year, the Court’s Advocate General sided with Ibero but the CJEU decision on 16 January 2014 has confirmed the opposite. The CJEU has decided that there is no basis on which a travel agent (acting as intermediary) can benefit from a VAT reduction when, on its own initiative and at its own expense, it grants a discount to the holidaymaker. The travel agent is therefore not entitled to a refund.

This decision is not good news for those travel agents who have lodged claims on this issue with HMRC and further comment is provided by ABTA Partner Deloitte.