MHA | Webinar: TOMS saves rent-to-rent business model
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Webinar: TOMS saves rent-to-rent business model

• 25th Jul 2023 - 10:00am - 11:00am

Watch the webinar in full below

We will be holding a webinar to explain how TOMS works for the serviced accommodation sector, to discuss the Sonder decision and to help you get started with TOMS.

Sonder Europe Ltd has won its case against HMRC at the First Tier VAT Tribunal. The decision was released on Friday and can be found here.

What is the case about?

The provision of holiday accommodation is standard rated, 20% for VAT. If TOMS can be used then the amount of VAT payable is significantly reduced because under TOMS you pay VAT only on the margin, which is the difference between the selling price and the direct costs of the accommodation, including rent, cleaning etc. Under TOMS VAT is due at 1/6th of the margin where the accommodation is in the UK. HMRC said that TOMS cannot be used, but the Tribunal has decided that where you rent in or lease in accommodation for any period of time (eg a season or a couple of years) from a third party and then rent out that accommodation as holiday accommodation, TOMS applies.

What happens next?

The good news is that there is no decision to prevent you applying TOMS in a R2R scenario if your situation is on all fours with Sonder’s. If you are not using TOMS then please contact us.

HMRC have 56 days to decide whether to appeal the decision to the Upper Tier Tribunal. If they do, then we await the next round of the battle! You can only go back four years to make a claim for overdeclared VAT, so if you are not already using TOMS, you should consider whether you need to make a claim applying TOMS and then potentially stand behind Sonder’s appeal in the courts to protect your position. We can help you with this.

HMRC may decide not to appeal. First Tier Tribunal decisions are not determinative so HMRC may still question the use of TOMS for R2R and they could decide to take another case in the future. Alternatively they may change the UK VAT law to exclude these types of supplies from being within TOMS. We will keep you updated with what happens next.

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