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

There was no real issue as to the primary facts before the FTT. It made findings of fact at [26] – [42] of the Decision and we summarise the FTT’s findings in the following paragraphs.

Sonder commenced its UK operations in 2017. During the relevant VAT periods it rented 40 individual apartments from third party landlords. The leases required Sonder to use the apartments only as serviced apartments for residential occupation. The evidence before the FTT was that leases between Sonder and the landlords were for terms between two and ten years. The landlords were not hoteliers and the case was argued on the basis that the supply bought in by Sonder was not the grant of any interest in, right over or licence to occupy holiday accommodation.

Approximately 37.5% of the apartments which Sonder rented were furnished and described as “ready to go”. The remaining 62.5% were unfurnished and could not be used in Sonder’s business until Sonder had furnished them to its specification. Furnishings provided by Sonder included beds, sofas, armchairs, coffee and side tables, chairs, bookcases and lamps as well as smaller decorative items such as rugs, vases and wall art and basic kitchen utensils. White goods were always provided by the landlords.

The FTT found at [30] and [31]:

The agreements between Sonder and the landlords were ‘internal repairing insuring’ leases. Sonder was responsible for keeping the apartments and any furnishings provided by the landlord as they were when the lease was entered into. If any damage was caused to an apartment such as a broken TV or a scratch on the wall, it would be Sonder’s responsibility to replace the TV and repair the damage to the wall. The apartments had to be delivered up in their original condition at the end of the lease. Any walls that had been painted had to be repainted and items added had to be removed.

Between October 2017 and May 2018 Sonder paid rent to landlords of approximately £1.5m. In the same period it spent approximately £20,000 on maintenance and repairs. There was no finding on how much Sonder spent on furnishing the unfurnished apartments.

Sonder used the apartments to provide accommodation to business and leisure travellers, described generally as “holiday accommodation”. A traveller would book online with Sonder and receive an access code to access the apartment. The traveller could not book directly with the landlord. Sonder had no staff on site, but would use a third party housekeeping company to provide cleaning and housekeeping services. Apartments were not normally cleaned during a stay, unless requested and paid for by the traveller.

Apartments were self-contained with the normal furnishings and features of an apartment. Apartments had kitchens with cooking utensils. Food and beverages were not provided apart from tea and coffee in some rooms.

Sonder had a “Hospitality Team” to support guests who had any questions, or who required additional items such as fresh towels or toiletries. Some apartments would have a self-service consumables cabinet. Otherwise, such items would be delivered by Sonder staff.

At the end of a stay, there was no check-out procedure as such. The traveller would simply leave the apartment.