Accommodation supply was not a designated travel service

The taxpayer Sonder started operating in the UK in 2017. It rented individual furnished and unfurnished apartments from third party landlords on terms of between two and ten years. Then after decorating and furnishing as required it let the apartments as self-contained holiday accommodation. Sonder had no staff on site but used third parties to provide cleaning and housekeeping services. The agreements between it and the landlords were ‘internal repairing insuring’ leases. At the end of the lease the apartments had to be returned in their original condition – any walls that had been painted had to be repainted and items added had to be removed. Sonder claimed it was a tour operator or travel agent for the purpose of the VAT tour operators’ margin scheme (TOMS).

HMRC disagreed but the First-tier Tribunal allowed the taxpayer’s appeal saying it supplied designated travel services...