Sonder v HMRC Case – TOMS Implications for Rent-To-Rent Operators

Major Update for UK Operators using the Rent-to-Rent Model

The Court of Appeal has approved a stay in the Sonder Europe Limited v HMRC case, postponing the hearing and providing critical time for the legal teams involved to secure funding.

What does this mean?

This case is particularly complex because Sonder Europe Limited is in liquidation and is therefore unable to fund the next stage of the legal proceedings itself.

The case has already been heard twice. At the First-tier Tribunal, the court ruled in favour of Sonder. That decision was then overturned at the Upper Tribunal, which ruled that Sonder Europe Limited, and by extension similar short-term rental operators using a rent to rent model, should not be able to apply the Tour Operators’ Margin Scheme for VAT. The implications of this are significant. If this ruling is upheld, HMRC could require operators to recalculate up to four years of VAT, potentially creating substantial financial liabilities, business failures, and job losses across the short-term rental sector and its wider supply chain.

Importantly, this campaign already has the support of all major UK short-term rental associations, along with several influential figures within the sector, even before the stay at the Court of Appeal could be made public. The stay has given the sector, alongside leading legal, tax and advisory specialists, the time needed to come together and find a solution to ensure this case is properly heard by the Court of Appeal.

Please note that even if the Court of Appeal ultimately rules in favour of Sonder Europe Limited, this will not automatically mean that your business can or should apply TOMS for VAT. Independent specialist tax advice should always be sought. However, a ruling would provide much needed clarity on who can and who cannot legitimately apply TOMS within their business.

Keep Updated

Sign up to receive updates and important information from Steve and the team, who are coordinating a group of sector specialists, influencers and experts to help ensure that the Sonder Europe Limited v HMRC Court of Appeal hearing proceeds.

This is a critical situation for all rent-to-rent operators in the UK. If you are affected by this case and want to be kept in the loop, register your details here.

Thanks to Steve Taggert and all of the teams in the UK: lawyers, accountants and associations, working to find and to fund a solution to take the case forward. Together with Steve, the SCALE UK team will be providing updates as they happen.