HM Revenue & Customs (HMRC) has secured a landmark victory in the Court of Appeal against Bolt Services UK Limited (Bolt), overturning earlier tribunal decisions that had brought the company’s ride-hailing services within the scope of the Tour Operators Margin Scheme (TOMS).
Background to the dispute
The dispute concerns whether Bolt’s on-demand private hire vehicle (PHV) services qualify for the TOMS for VAT purposes.
- The case has progressed through several levels of the courts, with both the First-tier Tribunal (FTT) and the Upper Tribunal (UT) previously finding in Bolt’s favour and concluding that its supplies were capable of qualifying under the scheme;
- HMRC subsequently appealed to the Court of Appeal, arguing that Bolt’s services were not of a kind commonly provided by travel agents or tour operators and therefore fell outside the scope of the TOMS; and
- The Court of Appeal unanimously agreed with HMRC.
The Court rejected Bolt’s argument that its services could not properly be distinguished from those provided by traditional travel businesses and found that the FTT had not established that travel agents and tour operators provide the same or similar services as Bolt’s on-demand minicab operations.
Recap of the Tour Operators Margin Scheme
The TOMS is a special VAT scheme that can apply where a business buys in and resupplies certain travel-related services, such as accommodation, passenger transport, vehicle hire, trips and excursions.
- If you are registered for VAT, you must normally account for tax on the full selling price of your supplies, but you can reclaim the VAT charged on purchases (subject to the normal rules).
- If your services fall under the TOMS, you only account for VAT on the difference between the amount you receive from your customer (including any amounts paid on behalf of your customer by third parties) and the amount you pay your suppliers. You cannot reclaim any VAT charged on the travel services and goods you buy in and resupply.
Legislative changes close the TOMS route for taxi and private hire operators
While the Court of Appeal decision resolves the dispute for historic periods, legislative changes introduced by the Government have effectively closed the issue for the future.
At the Autumn Budget 2024, the Government announced measures to prevent taxi and private hire vehicle operators from using the TOMS. An amendment to section 53 of the Value Added Tax Act 1994 came into effect on 2 January 2026, clarifying that such operators are not eligible to apply the scheme.
The change is not retrospective, meaning that VAT treatment for periods before 2 January 2026 remains dependent on the courts’ interpretation of the legislation in force at the time. However, for supplies made from that date onwards, taxi and private hire operators can no longer rely on the TOMS.
What this means for businesses
The Court of Appeal decision provides important clarification on the scope of the TOMS and reinforces that not all passenger transport services will qualify for the scheme.
The judgment confirms that:
- Businesses must demonstrate that their supplies are of a kind commonly provided by travel agents or tour operators;
- The status and characteristics of the services supplied remain important when determining eligibility under the scheme; and
- Taxi and private hire vehicle operators are now expressly excluded from the TOMS for supplies made on or after 2 January 2026.
The ruling also serves as a reminder that the application of the TOMS continues to depend heavily on the specific facts of each case.
How M+A Partners can help
Businesses that buy in and resell travel, accommodation or related services should carefully review their VAT position to ensure that they are applying the scheme correctly and in line with the latest case law and legislative developments.
For any guidance on this matter, please get in touch with our expert below.
