TOMS for On-Demand Taxi Services: Key Insights from the Bolt UK VAT Case

Here’s some good news for businesses dealing with the Tour Operators Margin Scheme (TOMS)! Bolt, the company known for its on-demand taxi services, has won an important appeal at the Upper Tribunal (UTT). This case looked closely at whether TOMS rules should apply to services like Bolt’s, especially when the company isn’t a traditional “tour operator” and when the service is offered on its own. It also re-examined if Bolt made big changes to the services it bought.

We understand why HMRC (the tax office) took their stance, as their rules are quite old (from the 1980s!). But it’s clear that the rules need to be updated to fit today’s modern world.

Bolt offers on-demand taxi services much like Uber. Their drivers are self-employed and sell their driving services (including their car and fuel) to Bolt. Bolt then sells these services to customers. Bolt mainly works as a platform that helps people book rides and gives out small extra things like a helpful guide or blog.

HMRC argued that because Bolt offered just one service and didn’t plan tours, and because “on-demand” journeys are different from traditional tours, Bolt’s services should not be under TOMS. HMRC also claimed Bolt changed the services a lot, though it wasn’t very clear how.

The First-tier Tribunal (FTT)  

At the FTT, the Tribunal acknowledged that while the exact nature of Bolt’s services was not typically associated with a tour operator, a broader view was necessary. The Tribunal determined that Bolt’s services were still “comparable” to those offered by tour operators and could be substituted for them. The timing of the booking was deemed an irrational way to determine TOMS applicability (would a booking 2 hours in advance qualify while one made 1 hour 59 minutes prior would not?). 

HMRC’s argument about material alteration was vague but seemed to suggest that Bolt’s use of its technology platform to allow customers to select pick-up and drop-off points constituted a material alteration. The Tribunal largely dismissed this point, noting that the provision of ancillary services is a key requirement for TOMS under EU law. 

The Upper Tribunal (UTT) 

HMRC appealed to the UTT on several grounds, arguing that the FTT had not properly considered the nature and timing of the journeys and that ancillary services alone should not bring Bolt’s services within TOMS. The issue of material alteration was also raised again. 

The UTT pointed out that “tour operator” is not defined in law and that TOMS applies primarily based on the nature of services rather than the classification of the business. Restricting TOMS based on business classification would create competition distortions. Existing EU case law (such as those concerning school study programmes, hotels, chalets, and transport consolidators) supports a broad interpretation of TOMS. Notably, HMRC’s own VAT Notice states that “all” supplies of passenger transport can fall within TOMS, provided the other conditions are met. Consequently, the Tribunal agreed that a high-level approach was necessary. 

Nature vs Purpose  

HMRC argued that Bolt’s services, which included trips to supermarkets and business-related travel, differed from those provided by a tour operator. However, the Tribunal found that consumers choose between scheduled and on-demand transport based on various factors (convenience, price, and availability) and that the timing of a booking should not impact VAT treatment. 

Regarding material alteration, HMRC suggested that Bolt’s role in connecting drivers with customers constituted an in-house supply rather than a direct service. However, the Tribunal referenced the UTT’s decision in Sonder, which found that a materially different service was one where the nature of what was bought in and sold on had changed. In Bolt’s case, this was not applicable—the driver still provided the same transport service under proper licensing and regulation. 

As a result, the UTT dismissed HMRC’s appeal on all grounds. 

Implications  

This is a significant victory for Bolt and similar businesses. While it remains to be seen whether HMRC will appeal further, having lost twice, its chances appear limited. 

Although the wider implications of this decision are yet to be fully realised, we believe this ruling supports a pragmatic approach to TOMS. It highlights the need for laws and interpretations that align with modern business practices rather than outdated regulations from the 1980s. The notion that last-minute bookings are atypical for tourists is simply unrealistic in an era where virtually everything can be arranged instantly via digital platforms. 

A long-standing concern for taxpayers has been HMRC’s inconsistent application of TOMS, compounded by unclear guidance. This lack of clarity disadvantages businesses trying to apply the rules fairly while remaining competitive. Given HMRC’s unwillingness to engage in dispute resolution for TOMS cases, taxpayers are often left with no choice but to endure costly tribunal proceedings. This is neither fair nor sustainable. 

We welcome this ruling as a step towards a more practical and modern approach to TOMS. We also hope HMRC considers these Tribunal observations in its ongoing UK TOMS review. 

For any enquiries please contact  

Louis Good 

louis@deeksvat.co.uk 

+44 7446 321371 

VAT Specialist 

Deeks VAT Consultancy