Upper Tribunal Tax and Chancery Chamber

UT (Tax & Chancery) UT/2023/000091 - [2025] UKUT 00014 (TCC)

Fecha: 04-Dic-2024

EU Law

EU Law

Article 26 of Council Directive 77/388/EEC (“the Sixth VAT Directive”) introduced the EU special scheme for travel agents. The Sixth VAT Directive was repealed and replaced by the PVD, which re-enacted Article 26 in Articles 306 to 310. The material provisions for the purposes of this appeal are as follows:

Article 306

Member States shall apply a special VAT scheme, in accordance with this Chapter, to transactions carried out by travel agents who deal with customers in their own name and use supplies of goods or services provided by other taxable persons, in the provision of travel facilities. This special scheme shall not apply to travel agents where they act solely as intermediaries and to whom point (c) of the first paragraph of Article 79 applies for the purposes of calculating the taxable amount.

For the purposes of this Chapter, tour operators shall be regarded as travel agents.

Article 307

Transactions made, in accordance with the conditions laid down in Article 306, by the travel agent in respect of a journey shall be regarded as a single service supplied by the travel agent to the traveller.

The single service shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has carried out the supply of services.

Article 308

The taxable amount and the price exclusive of VAT, within the meaning of point (8) of Article 226, in respect of the single service provided by the travel agent shall be the travel agent’s margin, that is to say, the difference between the total amount, exclusive of VAT, to be paid by the traveller and the actual cost to the travel agent of supplies of goods or services provided by other taxable persons, where those transactions are for the direct benefit of the traveller.

…

Article 310

VAT charged to the travel agent by other taxable persons in respect of transactions which are referred to in Article 307 and which are for the direct benefit of the traveller shall not be deductible or refundable in any Member State.

The FTT summarised the EU special scheme at [8] as follows:

It follows from the PVD that the EU special scheme applies to:

(1)

transactions carried out by travel agents or tour operators;

(2)

dealing with customers in their own name;

(3)

using supplies of goods or services provided by other taxable persons;

(4)

in the provision of travel facilities; and

(5)

where those supplies are for the direct benefit of the traveller.

The FTT further noted at [9] that the EU special scheme does not apply to travel agents where they act solely as intermediaries and are merely reimbursed expenditure incurred in the name of and on behalf of a customer.

The question of whether the TOMS is only engaged where the supplies received by Sonder had to be supplied for “the direct benefit of the traveller” and if so whether they were so supplied lies at the heart of this appeal.