VAT alert – travel sector clients and targets 

VAT alert – travel sector clients and targets

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A recent Upper Tier Tribunal case, SilverDoor Ltd [UT/2022/000133] has considered the VAT liability of payment handling fees.  

The appellant acted as agent between providers of short term residential accommodation (hotels etc) and their customers. SilverDoor contracted with the hotel providers to promote the accommodation and provide reservation services in return for a commission.  

Where corporate customers wished to pay for their bookings by credit card, SilverDoor charged an additional booking fee of 2.95%. They argued that the payment was VAT exempt as a financial intermediary service, i.e. the issue, transfer or receipt of, or any dealing with, money, any security for money or any note or order for the payment of money, and that this was a separate and distinct supply from the other services provided. 

The Courts decided that the payment did not qualify for VAT exemption as it was simply an ancillary service to the main supply of reservation/advertising and so it was liable to VAT. 

This is the latest in a series of cases on the treatment of payment handling fees and further demonstrates the narrow application of the VAT exemption for financial intermediaries. Specifically in the case of credit card transactions, VAT exemption only applies to the actual transfer of funds and not to any services which facilitate payment by card.  

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