The Court of Appeal of England and Wales has allowed HM Revenue & Customs’ appeal in its dispute with Bolt Services UK Limited, ruling that the Tour Operators Margin Scheme (TOMS) does not apply to Bolt’s supplies of private hire vehicle services.
The judgment overturns decisions of both the First-tier Tribunal and the Upper Tribunal, which had previously found in Bolt’s favour.
The case concerns the VAT treatment of Bolt’s UK operations and whether the company could account for VAT under TOMS rather than under the normal VAT rules.
The Dispute
The appeal centred on whether Bolt’s supplies qualified as “designated travel services” within the meaning of the TOMS legislation.
Bolt argued that it purchased passenger transport services from drivers and supplied those services to passengers in its own name. On that basis, it contended that the statutory conditions for applying TOMS were satisfied.
HMRC argued that TOMS was not intended to apply to private hire operators supplying passenger transport services and that Bolt’s interpretation was inconsistent with both the legislation and the purpose of the scheme.
The Court of Appeal agreed with HMRC.
The Court’s Findings
Giving judgment, the Court concluded that the tribunals below had erred in their interpretation of the TOMS provisions.
The Court held that the legislation must be interpreted in light of the purpose of the special scheme, taking account of its origins in European VAT law and the context in which it was introduced.
According to the judgment, TOMS was designed to address practical difficulties encountered by businesses in the travel sector that purchase and resupply travel services, particularly where those services are supplied across multiple jurisdictions.
The Court found that Bolt’s private hire operations did not fall within the scope of those objectives.
It rejected the proposition that the mere fact that passenger transport services were purchased and resupplied was sufficient to bring Bolt within the scheme.
Interpretation of TOMS
The Court examined both domestic legislation and the relevant European authorities concerning the operation of TOMS.
It noted that the special scheme constitutes an exception to the ordinary VAT rules and therefore requires careful interpretation.
The judgment emphasised that the application of TOMS depends not only on the nature of the services supplied but also on whether the supplies fall within the category of transactions that the scheme was intended to address.
In the Court’s view, extending TOMS to Bolt’s supplies would go beyond the purpose for which the regime was enacted.
Accordingly, Bolt was not entitled to account for VAT solely on its margin.
Previous Tribunal Decisions Overturned
The First-tier Tribunal had originally found that Bolt’s supplies qualified for TOMS treatment.
That decision was subsequently upheld by the Upper Tribunal.
HMRC appealed to the Court of Appeal, arguing that both tribunals had adopted an incorrect approach to the interpretation of the legislation.
The Court of Appeal accepted HMRC’s submissions and set aside the earlier decisions.
As a result, HMRC’s appeal was allowed.
Implications for Uber
The Bolt litigation has attracted wider attention because of its relevance to separate proceedings involving Uber.
Uber is pursuing a similar argument concerning the application of TOMS to private hire services.
Those proceedings have been stayed pending the outcome of the Bolt appeal.
Tribunal disclosures in the Uber case indicated that disputed VAT amounts deposited by Uber total approximately £1.446 billion.
The Court of Appeal’s reasoning in Bolt is therefore expected to be closely examined in the next stages of that litigation.
Next Steps
Bolt said it was disappointed by the Court of Appeal’s decision and that it would consider the options available to it.
HMRC welcomed the judgment, stating that it confirmed its position on the VAT treatment of private hire vehicle operator services of passenger transport.
Unless permission to appeal to the UK Supreme Court is sought and granted, the Court of Appeal’s judgment represents the current authoritative position on the application of TOMS to private hire operators in the United Kingdom.