The Squa.Re Limited v The Commissioners for HMRC
Decision date: 14 November 2022
Neutral citation: [2023] UKFTT 51 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
The Squa.re Ltd appealed HMRC assessments and refusal of an error correction asserting that the UK Tour Operators' Margin Scheme (TOMS) permits an overall negative margin and a VAT repayment. The Tribunal held that while individual supplies may show negative margins that can be included in the annual/global TOMS calculation to reduce positive margins, the UK scheme does not permit an overall negative taxable amount or an entitlement to repayment (the result is capped at nil), and dismissed the appeal.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
The ratio is that under the UK implementation of TOMS the taxable amount is a valuation of a supply and cannot be treated as creating a negative output tax leading to repayment; negative margins on individual supplies may be counted in the global annual calculation to offset positive margins, but the overall TOMS result cannot produce a repayment (tax due is capped at nil). The TOMS derogation from normal input recovery must be strictly construed and applied only to the extent necessary.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal indicated (obiter) that practical administrative considerations support including full block-booking costs in the global TOMS calculation rather than attempting fine-grained apportionment of unsold weeks, and that other margin schemes (and certain foreign implementations, e.g. Spanish law) are not readily analogous to UK TOMS given differing statutory language and objectives.