Sonder v HMRC Case: Major VAT Implications for Rent-to-Rent Operators

Major VAT Update for UK Rent-to-Rent Operators Using TOMS

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 independently fund the next stage of the legal proceedings.

The case has already been examined twice. At the First-Tier Tribunal, the court ruled in Sonder’s favor. That decision was then overturned at the Upper Tribunal, which determined that Sonder Europe Limited, and by extension similar short-term rental operators using a rent-to-rent model, should not be permitted to apply the Tour Operators’ Margin Scheme (TOMS) 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.

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

Please note that even if the Court of Appeal ultimately rules in favor 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 cannot legitimately apply TOMS within their business.

Stay Updated

Sign up to receive updates and important information from Steve and the team, who are coordinating a group of industry specialists, influencers, and experts to help ensure 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 stay informed, register your details here.

Thank you to Steve Taggert and all the UK teams — solicitors, accountants, and associations — working to find and fund a solution to carry the case forward. Alongside Steve, the SCALE UK team will provide updates as they happen.