De Vere must pay £9m in VAT dispute

Caroline Muspratt
Wednesday 16 April 2003 00:00 BST
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The hotels and leisure chain De Vere is to pay a £9.3m value-added tax charge on profits it had previously thought exempt from the duty.

The group believed profits from its golf and leisure membership service were exempt from VAT. It has now been told to pay £7m plus interest.

The company said: "For the period from April 1997 to December 1999, a De Vere Group subsidiary company treated its golf and leisure subscription revenues as exempt from VAT. HM Customs and Excise has contended that this income should be liable to VAT at the standard rate."

The VAT battle has been running since July 2000 but a tribunal has now ruled that the company is liable for the backdated charge. De Vere said it plans to appeal against the decision.

It said: "De Vere Group has 56 days to lodge an appeal and is considering the matter with legal advisers. This judgment has no impact on the ongoing prospects for the leisure clubs business." In the meantime it has decided to make a provision for the payment as an exceptional item in this financial year.

De Vere owns the Belfry golf course in Warwickshire and the Grand Hotel in Brighton. Analysts had forecast full-year pre-tax profits of £43m. There are now fears that these profits could be dented by as much as a quarter.

Shares in De Vere Group fell 8p to 305p from Monday's six-month high of 313p.

The group made a profit of £38.5m in 2002 compared with a loss of £18.1m the year before.

But Warrington-based De Vere said at its annual meeting in February that the trading outlook was still "uncertain" and the hoped-for recovery remained "difficult to predict".

Fears stemming from the war on Iraq have caused a downturn in international travel and fewer customers for hotels. "Geopolitical risks are impacting on the UK hotel market," the company warned in February. De Vere will announce first-half results on May 7.

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