However, it is important to note that tax laws and regulations can be complex and subject to change, and the outcome of specific cases or challenges can vary.
In the Sonder case, the business successfully argued that the Tour Operators Margin Scheme (TOMS) rules should apply to their VAT liability for UK holiday lets. This meant that VAT was payable only on Sonder’s profit margin rather than their gross income. This favourable outcome was based on the premise that the properties used for holiday lets were not materially altered from the properties leased by Sonder.
Interestingly though, Uber are proposing that their business model is the opposite and that there is a material alteration. It remains to be seen whether HMRC will clarify the position or if the legislation needs to be amended.
It’s worth noting a few key points:
1. Specific Business Structures: The VAT opportunity mentioned seems to apply to businesses with a particular business structure similar to that of Sonder, where the properties are leased rather than owned, and the TOMS rules can be successfully applied.
2. Potential Impact from Ongoing Litigation: As mentioned, the final outcome of ongoing litigation involving Uber and its use of TOMS on tax journeys could impact the VAT position for Sonder. Depending on the outcome, HMRC might appeal the Sonder case to the Upper Tribunal, which could potentially affect the VAT treatment for similar businesses.
3. Protective Claims: In cases where there is uncertainty or potential for VAT savings, businesses may consider making protective claims to preserve their rights and maximise possible benefits. These claims are often made to ensure that VAT claims for the past four years do not fall out of time.
4. Seek Professional Advice: Given the complexity of tax regulations and the potential for changes and legal challenge, it’s essential for businesses to seek professional advice from tax experts or consultants who can provide guidance tailored to their specific circumstances.
It’s important to stay informed about developments in tax law and consult with tax professionals who can provide up-to-date advice and help businesses navigate their VAT obligations effectively. Tax laws can change, and what may be a favourable opportunity today might not be the case in the future.