Bolt Services Ltd Case Report - VAT and Taxi Services

Tour Operators Margin Scheme (TOMS) & “non travel operators”

Success to report in the First Tier VAT Tribunal case of Bolt Services UK Ltd (Bolt) and HMRC with useful analysis of what is meant by the phrase “materially altered” in the context of supplies that can fall into the Tour Operators Margin Scheme (TOMS) in terms of their VAT treatment.

TOMS treatment of a supply means that the VAT declared as Output Tax is calculated on the margin achieved, as opposed to the value of the “sale”. Therefore to be found to have treated supplies as TOMS qualifying when they shouldn’t be, would create a large VAT exposure for any taxpayer challenged by HMRC. TOMS related supplies crop up in all types of business organisations – not just those of a “tour operator” and the Bolt case is further confirmation of that application to a business that – whilst it provided a supply of passenger transport which is a recognised TOMS supply – may not have fitted the usual description of being a “tour operator”.

The wide scope of the application of TOMS should be regarded by any organisation involved in the provision of TOMS type activities – those supplies being:

• Accommodation
• Passenger transport
• Hire of means of transport
• Use of special lounges at Airports
• Trips or excursions
• Services of tour guides

Other types of supplies fall to be TOMS but only if supplied as a part of a package with one or more of the above “primary” supplies.

Back to the case in point…..

Bolt approached the issue as to whether their supply – through a smartphone app – of a mobile ride-hailing, private hire passenger transport service, in a proactive way by requesting a non-statutory ruling from HMRC on whether their supplies – as a principal – of such service fell within TOMS. Having received a written decision from HMRC that they – HMRC - did not agree with that treatment Bolt had the opportunity to then take that decision to appeal in the First Tier Tribunal.

The analysis, by the very experienced Tribunal Judge, Greg Sinfield is an informative read – therefore, if time allows, you can access it here 

HMRC’s case was that Bolt was not a tour operator and did not make supplies of a kind commonly provided by tour operators or travel agents. They also argued that Bolt’s supplies of passenger transport fell outside of TOMS either because they were in-house supplies or – and this is where the tribunal analysis is helpful – were not in TOMS because they were supplies which were “materially altered” from the state they were in when Bolt bought them in. HMRC felt that the access to the platform – which Bolt operated it’s ride hailing service through – materially altered what Bolt bought in from the individual private hire driver to the end customer – you or I - booking a taxi (passenger transport) through the Platform.

The Judge did not agree with HMRC’s contentions however, commenting that:

“At a high level, Bolt supplies passenger transport and it is clear from the case law…. that transport is a travel service.” Moreover this type of supply is consistent with the type of transport services supplied by a tour operator or travel agent. It was noted that the type of “hailing a taxi” service might not be the manner of operation by a tour operator, but the Judge came back to the view that at the high level – what was being provided was passenger transport.

Hence success for the Tax payer, although of course, there is always the right of appeal by HMRC on the matter. This is not the first case we’ve commented on in terms of the use of TOMS to account for VAT on a travel related supply – see our earlier news update on Sonder Europe which deals with serviced flats and their treatment under TOMS – we are still awaiting news on HMRC’s appeal against that case it should be noted.

What can we take from the Bolt case then?

Firstly, the recognition that you don’t have to be a “tour operator” for TOMS to apply to your activities – if they fall as TOMS type supplies – this may have either a negative or positive impact from the VAT perspective depending on your circumstances – e.g. if you’d assumed TOMS applied and found under challenge from HMRC that it didn’t.

Secondly, it also demonstrates the value of being proactive in making a representation to HMRC on the VAT treatment to apply rather than be firefighting a liability challenge from HMRC – see additional news from the RealReed Ltd case below on one such situation.

And finally, well, it’s a reminder that VAT remains a complex tax not just across the travel sector. TOMS was a scheme initially devised to assist in the VAT accounting around travel services that crossed borders but having left the EU we still have access to it in UK law. Might that be under review in light of this run of recent cases – well that’s one to consider for 2024 now.

As ever, if this news update prompts a VAT concern do get in touch with your usual VAT contact here at Centurion – Xeinadin’s Indirect Tax team or use the general email address IndirectTax@Xeinadin.com and one of our VAT expert team will be in touch.

This article is for general information only and specific advice should always be sought.