Sonder Appeal Withdrawn

Sonder Europe Ltd has withdrawn its appeal, which makes the Upper Tribunal's decision final: TOMS does not apply to its serviced accommodation model.

Sonder leased properties for two to ten years and let them out as short-term holiday accommodation, paying VAT only on its margin under TOMS. The Upper Tribunal found that turning a long lease into holiday accommodation was a material alteration, so Sonder was providing its own "in-house" supply. That puts it outside TOMS, and VAT is due on the full price charged to the guest.

The decision leaves little room to use TOMS for rent-to-serviced-accommodation models. Operators with a model like Sonder's should move to the normal VAT rules and look at whether earlier periods need to be disclosed to HMRC. Anyone who still relies on TOMS should take advice before continuing, because HMRC is likely to look more closely at the sector now.