UT/2024/000008 - [2025] UKUT 00100 (TCC)

As regards the matters falling within Issue 1 (Grounds 1, 1a, 2, 2a and 3), we agree with the FTT’s conclusion. We may have reached that conclusion by a slightly different route, but if and to the extent that betrays any errors of law in the FTT’s approach, they are not material. At most, it could be said that in phrasing (in particular) FTT [107] as it did, the FTT articulated a truly absolute approach in respect of “passenger transport services” when an appropriately high-level approach cannot be said to have that result in all cases, but that paragraph was expressed in, and must be seen in, the overall context of the FTT Decision and it is clear that any very fine difference is immaterial. We will not set aside the FTT Decision on any of these grounds.

We dismiss these grounds of appeal.

As we have described above, on the second issue, the FTT found that the ride-hailing services provided by Bolt were services supplied for the benefit of a traveller without material alteration or further processing.

The FTT’s reasoning on this issue is set out at FTT [111].

Ms Mitrophanous KC for HMRC submitted that:

Ms Mitrophanous KC said that the FTT erred in several material respects:

Ms Mitrophanous KC said that in both cases, the FTT failed to consider the degree of alteration to the supplies. In particular, it did not take into account factors such as Bolt’s position as a licensed PHV operator and the provision of its platform that enabled the PHV rides to be provided to customers, lawfully and on-demand. Instead, the FTT focused on whether the supplies made to customers “were derived from” the supplies made by the drivers (FTT [111]).

Ms Sloane KC made the following submissions:

Ms Sloane KC said that, if anything, the decision in Sonder UT supports Bolt’s case:

As we identified above, there are differences in the wording of the PVD and the TOMS Order. In particular, the TOMS Order refers in Article 3 to a “designated travel service” as being a bought-in supply “supplied for the benefit of a traveller without material alteration or processing”. Article 306.1 PVD on the other hand simply refers to travel agents who “use supplies of goods or services provided by other taxable persons, in the provision of travel facilities”. Articles 308 and 310 then refer to the supply of services provided by other traders “for the direct benefit of the traveller”. Notwithstanding these differences, the FTT found that it was possible to adopt a conforming interpretation of the TOMS Order “if the requirement that the goods and services acquired from third parties means that they should not be so changed as to become in-house supplies” (FTT [73]).

There is no reference to “in-house supplies” in the PVD. The term is referred to in the CJEU case law typically in the context of distinguishing “in-house supplies” which cannot fall within the special scheme – because they cannot form part of the single service referred to in Articles 307 and 308 PVD – from supplies bought-in from third parties that fall within the scheme if the relevant criteria are met (see, for example, Kozak [24] and [27]). In this context, an in-house supply may refer to a supply made from the taxpayer’s own resources or a supply resulting from a combination of resources – the taxpayer’s own resources and goods and services that the taxpayer has bought-in from other traders - where the nature of the supply to the customer fundamentally differs from the supplies the taxpayer receives from the other traders.

As we understand it, Ms Mitrophanous KC’s criticism of the FTT’s conforming interpretation of Article 3(1)(b) of the TOMS Order at FTT [73] is that its explanation of the reference in the Order to “without material alteration or processing” is restricted to bought-in supplies that form part of “in-house supplies”. In a similar vein, although the FTT refers to the “direct benefit” issue (at FTT [111]), its conclusions tie the question of whether there is a direct benefit to the traveller to the question of whether the supply of the drivers’ services becomes part of an in-house supply. That explanation does not permit of the possibility that a bought-in supply might be excluded from the scheme simply because it is not provided “for the direct benefit of the traveller” irrespective of whether it forms part of an in-house supply.

We have not been referred to any direct authority on this point. As we mentioned above, between the date of the hearing and the issue of this decision, the Upper Tribunal issued its decision in another case concerning this aspect of the TOMS Order, Sonder UT, which addresses some of the issues concerning the conforming interpretation of the TOMS Order.

Sonder UT involved a taxpayer (Sonder) that leased apartments from third party landlords for periods of between two and ten years. It then granted licences to travellers to occupy the apartments for periods ranging from a single night up to a month, with an average stay of five nights. The question before the tribunal was whether Sonder’s supplies fell within the TOMS. The FTT found that Sonder’s supplies to its customers fell within the TOMS. Allowing HMRC’s appeal, the Upper Tribunal found that the supplies did not fall within TOMS. This was because the transformation of the bought-in supplies (the longer terms leases) into short-term holiday accommodation (the licences to customers) involved a material alteration such that the bought-in supplies did not directly benefit the traveller.

The Upper Tribunal identified the requirement for the bought-in supplies to be supplied “for the direct benefit of travellers” as the governing principle to be derived from Articles 306-310 PVD (Sonder UT [80]). It found that Article 3(1)(b) of the TOMS Order capable of a consistent interpretation (Sonder UT [85]), but counselled against any attempt to restate the wording of the test. The Upper Tribunal said this at Sonder UT [94]:

That test required a comparison between the bought-in supply and the supply that was made to the taxpayer’s customer (SonderUT [99], [113]-[114]). On the facts, the FTT had failed to apply that test correctly because it had focussed on physical changes to the apartments and failed to consider the full bundle of rights and interests that were bought-in and those that were on-supplied. In particular, the FTT did not take into account material differences between the nature of the longer-term property interests that formed the bought-in supplies, and the short-term rights provided to customers.

The Upper Tribunal in Sonder UT did not base its decision on the concept of in-house supplies and so does not determine whether these are separate and distinct issues. Even if there is a distinction – which we doubt - there must be a significant overlap between bought-in supplies that are not provided directly for the benefit of the traveller and those which form part of an in-house supply.

In the present case, if we undertake the exercise specified by the Upper Tribunal in Sonder UT to determine whether the supplies bought-in by Bolt are provided for the direct benefit of the traveller, we have to compare the supplies bought-in by Bolt – i.e. the services of the drivers – to the supplies made to Bolt’s customer. Having done so, we agree with the FTT that the supplies made by the drivers are made for the direct benefit of the traveller:

For similar reasons, we also agree with the FTT that the services of the drivers are not subsumed within a wider “in-house supply” made by Bolt. The services of the drivers in conveying the passenger from A to B in properly maintained, insured and taxed vehicle remain the same. They are not materially altered so that what the customer receives is fundamentally different from the services that the driver provides.

As with Issue 1, although our reasoning may at times differ, we agree with the FTT’s conclusions on Issue 2. If and to the extent that there are errors of law in the FTT’s reasons, they are immaterial. We do not set aside the FTT Decision.

We dismiss the appeal on Ground 4.

For the reasons given above, we dismiss HMRC’s appeal.

Any application for costs in relation to this appeal must be made in writing and served on the Tribunal and the person against whom it is made within one month after the date of release of this decision as required by rule 10(5)(a) and (6) of the Tribunal Procedure (Upper Tribunal) Rules 2008.