Bolt drives home victory in taxi VAT caseby
Bolt successfully argued before the tribunal that the tour operators margin scheme should be applicable, resulting in VAT being charged solely on the margin rather than the full amount of the fare.
This first tier tribunal (FTT) case continues the long running saga on the VAT treatment of ride hailing apps.
Bolt Services UK Limited (Bolt) offers on-demand private hire services which are ordered and paid for via a smartphone application.
There was no dispute about the fact that the rides were VATable but Bolt was contending that the tour operators margin scheme (TOMS) should apply and so VAT was due on the margin rather than the full amount of the fare.
What is TOMS?
TOMS is a special scheme for businesses that buy and resell travel, accommodation, and other services as a principal or undisclosed agent.
It covers anyone who is making relevant supplies, even if this is not their main business activity, or they are not a traditional tour operator. In VAT Notice 705/5, HMRC gives examples of:
- A hotelier who buys in coach passenger transport to collect its guests at the start and end of their stay;
- A coach operator who buys in hotel accommodation to put together a package;
- A company that arranges conferences, including providing hotel accommodation for delegates.
Relevant supplies include:
- Passenger transport
- Hire of a means of transport
- Trips or excursions
- Services of tour guides
- Use of special lounges at airports
A margin scheme supply is a ‘designated travel service’ which means it is a supply of goods or services which are both:
- Bought in from another person and resupplied without material alteration or further processing;
- Supplied by a tour operator from an establishment in the UK, for the direct benefit of a traveller.
When TOMS applies, VAT is due on the margin, rather than on the selling price. Clearly, these figures will be significantly different.
The argument from Bolt
Bolt contended that its supplies fall within TOMS because the ride hailing services are for the benefit of travellers and are of a kind commonly provided by tour operators or travel agents.
It also pointed out that to treat these services as falling outside TOMS would lead to distortion of competition and a breach of neutrality between traders providing travel services of a similar kind.
The argument from HMRC
HMRC argued that Bolt was not a tour operator or travel agent and it did not make the type of supplies commonly provided by tour operators or travel agents.
They also contended that tour operators buy in services and merely pass them on to the traveller, whereas in this case, the drivers’ services are changed by the use of Bolt’s own resources and not merely passed on.
The scope of the scheme
In considering this case, Judge Greg Sinfield referred to various UK and EU cases over the years.
He concluded that the essential aim of the EU scheme is to avoid the difficulties to which travel agents would be exposed by the application of normal VAT rules to their transactions involving services by third parties supplied partly inside and partly outside their member state of establishment. Because VAT treatment must remain consistent, the scheme also applies where the supplies made, and the travel agent, are all in the same country.
TOMS is restricted to transactions carried out by travel agents in the provision of travel facilities. The term 'travel agents' includes tour operators but also traders who are not travel agents in the normal sense of the term but who engage in transactions which are comparable to those of a travel agent or tour operator.
For TOMS to apply, travel services must be bought in and must be for the direct benefit of the traveller.
The case of Alpenchalets has confirmed that a single supply of holiday accommodation can be within the scope of TOMS. After considering this, and various other cases, the Judge concluded that, “There is no reason why a supply of transport, without any additional travel facilities, to a traveller should not come within [TOMS] in the same way as a supply of accommodation only.”
For its supplies to fall within TOMS, Bolt must:
A) Provide services of a kind commonly provided by tour operators and travel agents;
B) Supply the services of the drivers to the passengers without material alteration or further processing.
In respect of a) Mr Sinfield considered that the correct approach was to take a high level or general view and so concluded that passenger transport services are the kind of services commonly provided by tour operators or travel agents.
In respect of b) he concluded that, whilst there is an obvious indirect benefit to Bolt, the drivers’ services directly benefited the travellers and so were not materially altered or processed.
In conclusion, “the supply of mobile ride-hailing services, without any additional elements, to a traveller is a provision of travel facilities within TOMS”.
As such, the VAT liability for Bolt is on the margin only, not on the full fare. An excellent result for Bolt.
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Hilary Bevan has over 20 years of experience working in accountancy and tax. She is a qualified chartered certified accountant as well as a chartered tax adviser and an associate of the Institute of Indirect Taxation.
In 2018 Hilary set up her own independent consultancy firm, providing specialist VAT advice to firms of accountants and...