Hotelbeds UK Limited v Commissioners for HMRC
| Judgment Date | 09 September 2025 |
| Neutral Citation | [2025] EWHC 2312 (Admin) |
| Year | 2025 |
| Date | 09 September 2025 |
| Court | King's Bench Division (Administrative Court) |
Neutral Citation Number: [2025] EWHC 2312 (Admin)
Case No: AC-2023-LON-000068
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 09/09/2025
Before :
MRS JUSTICE FOSTER DBE
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Between :
THE KING (on the application of HOTELBEDS UK
LIMITED)
Claimant
- and -
COMMISSIONERS FOR HIS MAJESTY’S
REVENUE AND CUSTOMS
Defendant
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- - - - - - - - - - - - - - - - - - - - -
Sarabjit Singh KC (instructed by Eversheds Sutherland (International) LLP) for the
Claimant
Howard Watkinson (instructed by HMRC Solicitor’s Office & Legal Services) for the
Defendants
Hearing dates: 16-17 October 2024
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Approved Judgment
This judgment was handed down remotely at 14:00 on 9th September 2025 by circulation to
the parties or their representatives by e-mail and by release to the National Archives.
.............................
MRS JUSTICE FOSTER
Judgment Approved by the court for handing down. HOTELBEDS V HMRC
Mrs Justice Foster DBE:
The issue
1. The issue in this case is whether the Claimant, who was established in 1974, a
wholesale supplier of hotel rooms, is entitled to deduct input tax on a series of
supplies which were the subject of two Error Correction Notices (“ECNs”) submitted
to HMRC but refused by a Decision Letter dated 9 May 2023. The ECNs were dated
3 September 2021 for VAT periods March 2020 – June 2021 (in the amended sum of
£416,977.11), and 25 January 2023 for VAT periods July 2021 – November 2022 (in
the amended sum of £9,768,327.58). Two earlier ECNs were honoured by HMRC and
the Claimant says the second two ECNs, based upon evidence of the same sort as the
first two, ought to be paid in the same way; that is to say, they argue, consistently with
HMRC’s published policy.
2. It is the Claimant’s case that they are entitled to a mandatory order that HMRC must
follow their Guidance contained inter alia in a document known as VIT31200 from
HMRC’s Manual, and the relevant Statement of Practice ‘VAT Strategy: Input Tax
deduction without a valid VAT invoice’. There is also a passage in Notice 700 with the
heading “Guidance VAT guide (VAT Notice 700) The guide to VAT rules and
procedures” headed “16.8 Invalid invoice procedure with two sections: 16.8.1 What
to do if you hold an invalid VAT invoice” and “16.8.2 When and how HMRC will
exercise its discretion.” Each of these supports the proposition that in the present
circumstances input tax deduction should have been allowed they argue.
Alternatively, HMRC is they say to respect the Claimant’s legitimate expectation by
repaying to the Claimant the input tax claimed in the third and fourth ECNs.
Judgment Approved by the court for handing down. HOTELBEDS V HMRC
3. To understand the context of the decision-making requires the setting out of a fairly
substantial body of written material.
Framework
law underpinning the right to deduct input tax and the entitlement to exercise that
right. It is described by Lewison LJ in Tower Bridge GP Ltd v Revenue and Customs
Commissioners [2022] STC 1324. Where emphasis appears it has throughout been
added.
“…
[15] … The supply of goods for a consideration within the
territory of a member state by a taxable person acting as such,
is subject to VAT: art 2. The VAT is payable by the taxable
person carrying out a taxable supply of goods or services: art
193. Every taxable person who carries out supplies of goods or
services in respect of which VAT is deductible must be
identified by an individual number: art 214. Where a taxable
person makes a taxable supply, he must issue an invoice: art
220.
[16] The recipient of a taxable supply, if he is also a taxable
person, is entitled to deduct the amount of VAT he paid in
relation to that supply. Thus art 167 provides
‘A right of deduction shall arise at the time the deductible
tax becomes chargeable.’
[17] Article 168(a) provides:
‘In so far as the goods and services are used for the purposes
of the taxed transactions of a taxable person, the taxable
person shall be entitled, in the Member State in which he
carries out these transactions, to deduct the following from
the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of
supplies to him of goods or services, carried out or to be
carried out by another taxable person …’
[18] These articles establish the principle. Other articles deal
with how the right to deduct is to be exercised. Article 178
relevantly provides:
‘In order to exercise the right of deduction, a taxable
person must meet the following conditions:
(a) for the purposes of deductions pursuant to Article
168(a), in respect of the supply of goods or services, he
must hold an invoice drawn up in accordance with Articles
220 to 236 and Articles 238, 239 and 240
…
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