VAT Tribunal decision may set Tour Operators Margin Scheme precedent

Bolt originally won its appeal to the First-tier Tribunal in December 2023, but HMRC challenged the decision. The case centred on whether Bolt’s app-based service, where it acts as a principal in supplying passenger transport via self-employed drivers, should qualify under TOMS.

HMRC argued that Bolt’s business was not similar to that of traditional travel agents/tour operators. It contended that the ride-hailing service didn’t meet the legal conditions for TOMS and that the services were also “materially altered” before being supplied to end customers. The tribunal disagreed and found that Bolt’s services broadly involved passenger transport, and that this was a service often arranged by travel agents, for example around airport and station transfers. The Tribunal found that these services, even when arranged last-minute through a digital app, are comparable to what agents and tour firms provide.

The transport services were deemed not to be materially altered after being bought in from drivers. The drivers are “independent” and Bolt’s platform simply matched travellers with drivers/cars. Extra features, including in-app booking, customer support and information simply strengthened its core offering, even if such extras weren’t strictly needed by the passengers.  

The decision means Bolt should calculate VAT on its gross margin only rather than the full fare, which will significantly reduce the amount of VAT due. The decision also sets a potential precedent for other providers using digital platforms and potentially more traditional high-street sector models. In most cases, it may mean that operators have very little extra VAT to pay. 
The decision poses some real challenges for HMRC as they have typically taken the view historically that TOMS does not apply to the Private Hire/Taxi sector. HMRC recently issued a Consultation for the sector following the Uber case which contained a number of possible solutions to taxing the sector in which a new but targeted Private Hire version of TOMS was considered. 

Azets strongly advise businesses in the sector to seek VAT advice about their own position to establish the risks of any historic VAT liability and how to protect themselves where possible going forward. HMRC may still consider a further appeal but this seems unlikely on the back of two losses in the courts.

If you have any questions on how this may impact you or on your VAT position generally, please get in touch with a VAT specialist. Alternatively, contact your usual Azets advisor.