THE SQUA.RE LIMITED v Revenue & Customs (VAT - tour operators' margin scheme - treatment of cost of unsold inventory)

VAT - tour operators� margin scheme - treatment of cost of unsold inventory - treatment of inventory sold at a loss - can there be a negative margin - not overall - appeal dismissed

For the Respondents: �� Ms Olivia Donovan litigator of HM Revenue and Customs� Solicitor�s Office

             This is an appeal against two assessments raised by HM Revenue & Customs ( HMRC ) and the rejection of an error correction notice submitted by The Squa.re Limited ( the Appellant ) in respect of calculations performed by the Appellant under the Tour Operators Margin Scheme ( the TOMS ) and in particular whether the TOMS operated in such a way as to permit a negative calculation resulting in repayment to the Appellant.�

             The Appellant�s supply to its customers includes the provision of online/telephone concierge service, cleaning etc. which, in the main it also buys in from third parties and on supplies as part of the package of services offered to its customers.

             On 27 January 2017, the Appellant submitted an error correction notice in the sum of �272,894 for VAT considered to have been overpaid under the TOMS for the VAT prescribed accounting periods 03/16 - 09/16.� The sum was calculated on the basis that the TOMS does not exclude the possibility of a negative margin, and, in that period, VAT had been overpaid when the full cost of bought in accommodation was taken into account.