TOMS Torment

HMRC have won the highly anticipated Upper Tribunal against Sonder. As we’ve covered previously, Sonder were
successful at the FTT in arguing that its supplies of holiday accommodation fell under TOMS. Sonder bought in
furnished and unfurnished accommodation on two to ten year leases, and repackage those into short-term lets.
The TOMS scheme allowed them to reduce the VAT payable, by only declaring output tax on the margin – i.e. the
selling price, less the exempt rental costs to the owner.

Whilst the FTT agreed with Sonder the Upper Tribunal did not. They found that “the services supplied by the
landlord to Sonder were not for the direct benefit of Sonder’s own customers and the services were not supplied by
Sonder for the benefit of the traveller without material alteration and further processing. In short, the services
supplied by Sonder to the traveller were its own in-house supplies, which therefore fall outside the ambit of TOMS.”
In summary VAT should be due on the full selling price for all short-term Airbnb style accommodation.