HM Revenue & Customs v Sonder Europe Ltd [2025] UKUT 00014 (TCC), 14 January 2025
The Upper Tribunal (Tax and Chancery Chamber, Mr Justice Trower and Judge Jonathan Cannan) has allowed HMRC’s appeal from Sonder Europe Ltd v HMRC [2023] UKFTT 610 (TC). The UT has held that Sonder’s supplies of short-term travel accommodation did not fall within the scope of the Tour Operators’ Margin Scheme (“TOMS”) for the purposes of VAT.
Sonder leased self-contained apartments (furnished and unfurnished) from third party landlords for terms of between two and ten years. The landlords’ supplies were exempt supplies of land, not taxable supplies of travel accommodation. Sonder granted licences to occupy the apartments for periods ranging from a single night to a month. During the relevant VAT periods, the average stay was five nights. Sonder 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. HMRC contended that Sonder’s supplies did not fall within the TOMS and that Sonder was required to account for VAT under the ordinary rules at the standard rate on the full value of the consideration received.
The FTT held that the TOMS applied and allowed Sonder’s appeal. The UT held that the FTT erred in law in failing to have regard to the requirement under the PVD that the bought-in supply be for the “direct benefit” of the traveller when interpreting and applying Article 3(1)(b) of the UK TOMS Order. The UT also held that the FTT mischaracterised the precise nature of the supplies to which the test is to be applied: although the FTT (correctly) compared the nature and extent of the physical changes made to the actual apartments, it did not compare the alterations to the full bundle of rights and interests supplied to Sonder with those which were supplied by Sonder to its customers.
Andrew Macnab acted for HMRC.
Read the Upper Tribunal’s decision here.
Read the FTT’s decision here.