A VAT tribunal has ruled that tour operator Simply Travel can wait until the end of the year to choose the most favourable means to calculate its VAT.

The decision means that other tour operators could follow suit to capitalise on the substantial savings that might be made, estimated at millions of pounds across the travel industry.

Alan Mathias, director of VAT services, at Deloitte and Touche, Cardiff, said: "The sum at stake for Simply Travel was £37,000. When multiplied across the number of tour operators in the UK, there could be annual savings of £20m for the industry. The large players could be looking at hundreds of thousands each.

"Simply Travel had applied to Customs to change the way it calculated VAT for the financial year 1997/98."

There are two methods available under the Tour Operator's Margin Scheme. Customs refused, arguing that this type of application had to be made at the start of the financial year.

The VAT tribunal ruled that the tour operator had the right to make its choice at the year-end as long as it was made before the VAT return was due.

Mr Mathias said: "Customs may challenge the ruling, given the amount of revenue it could lose, and it will be up to a high court judge to decide. However the tribunal courts have the power to affect many operators."