In Sonder Europe Limited v HMRC [2023] TC08853, the First Tier Tribunal (FTT) agreed that the onward supply of rented apartments meant the appellant was a tour operator within the scope of the Tour Operator’s Margin Scheme (TOMS).

  • Sonder Europe Limited (Sonder) is a UK incorporated company, operating within a wider multinational group. The company operated under the group's brand name 'Sonder'.
  • Sonder provided rented self-catering accommodation through the Sonder App. No other services were provided.
  • No staff were available on-site but there was a 24-hour help section of the App.
  • Sonder Started trading in the UK in 2017, with 40 apartments provided by third-party landlords.
    • The tenancy agreements entered into by Sonder were purely residential in nature.
    • The apartments were a mix of furnished and unfurnished (where Sonder had to fit out the accommodation before the onward supply).
    • Ongoing repairs were the responsibility of Sonder under the agreements.
  • For the VAT periods ended October 2017 through to April 2018, Sonder accounted for the supplies on the basis that it fell within TOMS.
  • In 2019, HMRC decided that this was not the case and raised an Assessment for over £250,000 in standard-rated Output VAT.
  • Sonder requested a review which confirmed the outcome, so it Appealed to the FTT.

TOMS is a special EU VAT scheme based on the EU Principal Directive. Up until 31 December 2020, the UK was still governed by EU VAT laws. It is incorporated into UK law through s.53 VATA 1994 and the TOMS Order.

TOMS applies where:

  • There is a supply of goods or services by:
    • A tour operator.
    • A travel agent acting as a Principal.
    • Any other person providing, for the benefit of travellers, services of any kind commonly provided by tour operators or travel agents.
  • The goods or services:
    • Were acquired for the purposes of the supplier’s business.
    • Are supplied for the benefit of a traveller without material alteration or further processing.

The FTT decided:

  • There was no requirement within the legislation that meant that Sonder had to buy in holiday or hotel accommodation.
  • The nature of the bought-in supplies did not determine the nature of the onward supplies.
  • Sonder provided serviced apartments as temporary accommodation to travellers. This meant the apartments were travel facilities for the benefit of travellers.
  • This type of accommodation is commonly provided by travel agents and tour operators.
  • On this basis, Sonder was classed as a tour operator for the TOMS Order.
  • The accommodation was bought by Sonder for the purposes of its business.
  • The TOMS Order requirement that the onward supply had to be 'without material alteration or further processing' referred to an alternation that changed the nature of the goods supplied. Minor alterations of the type performed by Sonder did not fall into this category.
  • Sonder met all of the qualifying criteria of the TOMS Order.

The appeal was allowed.

Useful guides on this topic

Agents and principals
What is an agent for VAT purposes? What is a principal? When do the agency rules apply?

Appeals: VAT
How do I appeal a VAT penalty?  How can I request a Statutory Review? How do I appeal an HMRC decision?    

External link

Sonder Europe Limited v HMRC [2023] TC08853


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