VAT Update - HMRC v Sonder Europe Ltd [2025] UKUT 00014 (TCC)

On 14 January, the Upper Tribunal (UT) upheld HMRC’s appeal against the First-tier Tribunal’s (FTT) decision that supplies of accommodation fell within the VAT tour operators’ margin scheme (TOMS). This means that rather than output VAT being charged on the company’s margin, it will now be charged on the value of supplies to travellers.

By Debbie Franklin, Director of Tax and property tax specialist

On 14 January, the Upper Tribunal (UT) upheld HMRC's appeal against the First-tier Tribunal's (FTT) decision that supplies of accommodation fell within the VAT tour operators' margin scheme (TOMS). This means that rather than output VAT being charged on the company's margin, it will now be charged on the value of supplies to travellers.

The UT agreed with HMRC and remade the decision noting that:

“In our view 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.”

The UT's decision can be seen here.

We will now fully review the implications of this case along with the next steps and keep you informed.

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