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Flawed approach to TOMS
Key points
- TOMS can be beneficial for some businesses reducing the amount of VAT payable to HMRC.
- HMRC has regularly excluded suppliers from using TOMS on the grounds that they cause ‘material alteration’ to the goods or services purchased.
- The tribunal found the change from leasing in the apartments for a term of years to letting them out as short-stay holiday accommodation did not amount to material alteration.
- Businesses that lease property which they offer as holiday accommodation should consider whether they have overpaid VAT in the past.
On 5 July 2023 the First-tier Tribunal released its decision in the case of Sonder Europe Ltd (TC8852). The judge found against HMRC and allowed the taxpayer to account for VAT on the margin only rather than on the full sales price as HMRC had contended – a result which will be of particular interest to businesses purchasing property which...
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