HMRC Tribunal

HMRC Tribunal

HMRC has won its appeal to the Upper Tribunal (Tax) in the case of Sonder Europe Ltd.

The Upper Tribunal has allowed HMRC’s appeal and decided that Sonder’s supplies of short-term travel accommodation did not fall within the scope of the Tour Operators’ Margin Scheme (“TOMS”) for VAT purposes.

The company leased self-contained apartments, some of which were furnished and others unfurnished, from landlords on a long-term basis. It then hired the apartments out to holidaymakers on a short-term basis.

The company granted licences to occupy the apartments for periods ranging from a single night to a month and it accounted for VAT under the TOMS on its margin, namely the difference between the total amount, exclusive of VAT, payable by the customer and the cost to Sonder payable to the landlord. The Upper Tribunal held that Sonder’s supplies of short-term travel accommodation had been “materially altered” and thus did not fall within the scope of the Tour Operators’ Margin Scheme (“TOMS”) for VAT purposes.

Therefore, if you or any of your clients lease self-contained apartments and supply short-term accommodation onwards, please contact our free helpline on 0161 477 6600 to discuss the VAT liability of your income.

Case study

A business recently contacted our free helpline to determine when its business should register for VAT. Although the company was incorporated in the UK, it supplied its services and operated from Spain.

The company was not regarded as being “established” in the United Kingdom for VAT purposes, as the company was operating from Spain. UK VAT legislation only applies if the company is regarded as being “established” in the United Kingdom. Therefore, the company was not liable to register for UK VAT. Instead, the company’s income was only subject to the Spanish VAT rules.

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