Ormerod Rutter VAT Specialist David Pegg talks us through an update on a recent TOMs tribunal ruling:
“ In 2023 the Tax Tribunal heard the case of Sonder Europe Limited (“SEL”) with regard to the proposition that its’ supplies of holiday accommodation fell within the Tour Operators Margin Scheme (“ TOMS”) meaning that they only had to pay VAT on their gross profit margin, and not the full amount received from customers. One of the condition of TOMS is that the accommodation had to be purchased by SEL and resupplied to its’ customers without being “materially altered” and was for the “benefit of travelers” and the Tribunal found in favour of SEL meaning that they, and in theory any other provider of holiday accommodation whose supplies were on all fours with SEL, could use TOMS, and a number have.
HMRC Appealed this decision to the Upper Tax Tribunal and on the 14 January their decision was released, essentially reversing the ruling given by the Tax Tribunal. The Upper Tribunal found that the supplies of accommodation bought in by SEL were not for the benefit of travelers but were supplied to SEL for their benefit and also that the “full bundle or rights and interests” granted by SEL to their customers was materially different to the supplies made by external landlords to SEL.
So, what does this all mean? Well, it is not clear whether SEL will lodge a further Appeal to the Court of Appeal and/ or whether HMRC will now issue guidance as to their position on this matter. However, we advise caution if you are considering entering into an arrangement to take advantage of TOMS because the Upper Tribunal ruling is binding, subject to any successful Appeal.”
If you already have such an arrangement in place, please contact David Pegg, our VAT Partner, to discuss your position. Call 01905 777600 or email hello@ormerodrutter.co.uk.
More updates and articles can be found on our insights page.
