IMPORTANT – DO YOU HAVE CLIENTS THAT SUPPLY SERVICED ACCOMMODATION?

Are you aware that Sonder Europe Limited has won its case against HMRC?

This case holds significant implications for providers of serviced accommodation.

The First Tier Tribunal ruled that the onward supply of rented apartments comes within the scope of the Tour Operators Margin Scheme (“TOMS”).

Applying TOMS is compulsory and where it’s relevant, VAT is owed only on the profit margin, not the entire selling price of the accommodation. This can result in notable VAT savings for your clients.

Sonder leased apartments and let them to travellers as short-term accommodation. HMRC raised an assessment on the basis that such supplies did not fall within TOMS and VAT was due on the full selling price not just on the margin. The FTT allowed Sonder’s appeal, holding that:

• Sonder was a “tour operator” for the purposes of TOMS; and
• the changes made by Sonder to the apartments (e.g., painting and furnishing empty apartments) did not count as a material alteration under TOMS, which means TOMS applied. 

FTT decisions are not binding on other parties, but where the facts are the same should be followed. 

What does this mean for your serviced accommodation clients? 

1. If your client already uses TOMS, continue to use it.
2. If your client does not already use TOMS, you can implement it if their supplies fall within TOMS.
3. If your client does not already use TOMS, you can put in a claim to correct the past 4 years. 

If your clients buy in accommodation and let it out as serviced accommodation and account for VAT on the full selling price under the normal VAT rules, they may be able to submit a claim (going back 4 years) to recover the VAT overpaid to HMRC. 

HMRC have 56 days to appeal the decision to the Upper Tier Tribunal. If they do, we can stand any claim made behind this case.

Time is of the essence. It is vital to act promptly, given the 4-year statutory time limit for submitting claims. Due to TOMS’ annual adjustment requirement, clients could potentially forfeit a year’s claim.

We are here to assist and guide you through the TOMS complexities. With a solid history in addressing VAT challenges, our priority is to ensure your clients benefit from informed and effective advice. 

Please contact us for a detailed conversation, so that we can outline the best strategies for your clients.