In Vacation Rentals v HMRC [2018] UKUT 0383, upon judicial review, the Upper Tribunal held that a taxpayer had legitimate expectation when it relied on a Business Brief from HMRC about VAT on card handling charges.

  • The company provided a holiday booking service. This included collecting payments from customers.
  • When payment was made by a debit or credit card, an additional charge was made by the company.
  • The company claimed that this charge was exempt from VAT under Value Added Tax Act 1994 Sch 9 Group 5 Item 1.
  • In 2006, HMRC issued Business Brief BB 18/06. This broadly stated that such charges were exempt.
  • In 2010, HMRC said that the company’s services were not within the scope of BB 18/06, and assessed it to £329,929 plus interest.

HMRC argued:

  • The company’s services were not within the scope of BB 18/06 because of their manner of collecting payment
  • HMRC was not bound by BB 18/06 anyway.

The UT dismissed both arguments:

  • Whether the company collected payment directly from the bank was not a factor set out in BB 18/06.
  • As HMRC accepted that BB 18/06 created a legitimate expectation, HMRC was bound by it.


 This case was decided on the basis of the law as it applied at the time. Since then, the Court of Justice of the European Union has ruled in National Exhibition Centre v HMRC [2016] STC 2132 that such card handling services are taxable. However, the decision on legitimate expectation remains valid.

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Grounds of appeal: legitimate expectation 
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Vacation Rentals v HMRC [2018] UKUT 0383