After a decade-long tussle, creditors of the On Holiday Group (OHG) are set to receive dispersed funds.
- The OHG faced a VAT dispute with HMRC related to the Tour Operator Margins Scheme (TOMS), amassing £3.6 million.
- This lengthy legal battle tied up OHG’s cashflow, leading to its closure in 2014.
- Despite the Supreme Court ruling in favour of Medhotels, HMRC continued its pursuit of VAT from similar companies.
- Only in 2021 was the VAT repaid, permitting the liquidator to proceed with dispersing funds.
The liquidation of On Holiday Group (OHG) marks the end of a protracted struggle over VAT obligations with the UK’s tax authority, HMRC. The crux of the issue was a disputed £3.6 million in VAT under the Tour Operator Margins Scheme (TOMS), which demanded repayment from OHG as it was considered a principal in holiday sales rather than merely an agent. This financial burden critically undermined OHG’s operations, ultimately leading to its cessation a decade ago.
The dispute echoed HMRC’s previous claims against Medhotels, another bed bank, where they sought £7 million in TOMS VAT. Medhotels’ case escalated to the Supreme Court, which ruled in their favour in 2014. Despite this, HMRC persisted in its claims against other similar companies till 2020. Former OHG chief executive, Steve Endacott, highlighted the severity of the situation, stating: “The business was destroyed overnight” by the VAT demand.
The turning point came in 2021 when HMRC finally repaid the VAT, enabling the liquidators to orchestrate the disbursement of funds. OHG’s financial woes saw it collapse in 2014 owing more than £8 million beyond its assets, inclusive of the contested VAT amount. This resolution foresees creditors, primarily hotel partners, receiving approximately £2.2 million. Notably, this sum falls short of the £13 million claimed by creditors, as considerable resources were diverted towards legal and expert fees.
Endacott expressed a sense of closure, albeit mixed with regret, observing that had it not been for the VAT claim, the firm’s downfall might have been averted. Yet, he remains optimistic about the forthcoming distribution of funds to hotel operators who have awaited compensation for years. The case underlines the complexity and potential pitfalls within financial regulations and their interpretations.
This case stands as a stark example of the potential ripple effects of regulatory disputes on businesses.
