Youhotels.com opts out of principal status

Leading hotel bed supplier to online travel agents youhotels.com has followed its main rivals by opting to stop acting as a principal.

Leading hotel bed supplier to online travel agents youhotels.com has followed its main rivals by opting to stop acting as a principal.

The move means the supplier will stop being liable to pay VAT under the Tour Operators Margin Scheme (Toms).

It comes after youhotels announced it was culling around 30% of its worst performing hotels as it looked to focus on quality over quantity.

Youhotels.com managing director Matt Cheevers said the move reflected changing attitudes in the sector about principal status and came after discussions with partners.

“Youhotels.com is one of the last remaining bed banks to operate as a principal and it no longer makes business sense to continue to do so,” he said.

“We can’t continue to offer our clients fantastic prices if we have to absorb the costs associated with principal status.”

The issue of principal status for bed banks was thrown into sharp relief after two children died of carbon monoxide poisoning on a Thomas Cook holiday in Corfu in 2006.

This prompted some travel agency groups to declare that they would only use suppliers with principal status as they take full liability for the product.

But this period did not last long and after bed banks that retained principal status were not found to be being favoured by retailers, most switched back.

Youhotels however, under its previous name youtravel.com, stuck out, but the decision to change has come after a review of the business by Deloittes.

The issue of liability and VAT exposure have been in flux, with changes to Atol rules due to come in next April set to force dynamic packaging agents to get a Flight-Plus licence.

Bed banks have never sought to avoid their health and safety responsibilities but VAT liability has been an important issue.

This year an attempt by Her Majesty’s Revenue and Customs to claim £7 million in VAT from Medhotels dating back to when it was owned by lastminute.com was rejected in a High Court appeal.

Although HMRC is not thought to have abandoned its pursuit of the accommodation-only sector, it has recently emerged it has been agitating the tax authorities in destinations where hoteliers are liable if the tax has not been paid in the country where the sale took place.

Youhotels.com will still hold principal status for all bookings made prior to the switchover.