New EU ruling means families face £120 price hike for holidays

Family holiday costs are expected to rise after a ruling from the European Court on the calculation of VAT on package holidays.

According to StockMarketWire, the new rules mean that EU travel wholesalers will have to calculate the VAT for each transaction and not on the gross margin over an extended period or over multiple transactions.

Currently, wholesalers can sell flights or the passenger transport element of an EU package without VAT, but once the new rules come into force, they will have to account for VAT from the whole profit margin on sales of travel in the country.

The Daily Mail reports that this is likely to have the biggest effect on families. Tax experts believe there could be a three per cent rise in the average cost of a package holiday.

This means that a family of four travelling to Spain or Greece during peak season, with flights and a villa costing £4,000 in total, could pay £120 more.

Holiday companies could be forced to take on the new tax rules within six months.

Matthew Elliott, chief executive of the Business for Britain campaign told the Daily Mail: "Most people will be shocked to hear Brussels can influence UK taxes in this way. Bad directives like this one artificially raise prices, hurting consumers and businesses alike."

A HMRC spokesman told Travel Weekly: "We are considering the implications of the judgment carefully."

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