Do you supply serviced, holiday or leisure accommodation? You may have paid too much VAT!
A recent First Tier tribunal decision in the case of Sonder Europe Ltd v HMRC [2023] TC08853 has gone against HMRC’s existing policy that “if you hire, lease or rent accommodation under an agreement whereby you take responsibility for the upkeep of the property and you are required to undertake any maintenance to the fabric of the building (that is, not just cleaning and changing towels or bed linen and so on), you are making an in-house supply of accommodation.” (VAT Notice 709/5 s7.6)
One of the key factors in the tribunal making this decision is that they did not consider changes to the property such as painting and decorating or the furnishing of the property to be a material alteration or further processing of the supply which had been bought in. This has the effect of making this a margin scheme supply rather than an in-house supply and as such is subject to the rules of the TOMS VAT scheme.
Under the TOMS rules VAT is accounted for on the margin of the supply rather than on the full selling price.
This may mean if you are in business of ‘lease to rent’ and you have previously accounted for VAT on the full selling price of your sales you may have paid too much VAT to HMRC. You may be entitled to submit a claim (going back 4 years) for overdeclared VAT paid to HMRC.
Time is of the essence. It is vital to act promptly, given the 4-year statutory time limit for submitting claims. Due to TOMS’ annual adjustment requirement, clients could potentially forfeit a year’s claim.
If you would like to discuss the outcome of the case and what this means for any client’s who provide similar accommodation or serviced accommodation and how Vantage could help with any potential VAT reclaims, please call and speak to our dedicated VAT advisers.
Written by Neil Maddison, VAT Consultant
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