Can You Use TOMS for Your Airbnb Business? Here’s What You Need to Know

The TOMS VAT scheme for Airbnb hosts is often misunderstood, but it can offer major tax savings if used correctly. If you run an Airbnb or serviced accommodation business, this guide will help you understand whether you qualify.

If you’re running an Airbnb or serviced accommodation business in the UK, you’ve probably heard of the Tour Operators’ Margin Scheme (TOMS). It’s a VAT scheme that can significantly reduce your tax bill, especially if used correctly in the Airbnb VAT UK context.

But does it apply to you as an Airbnb host?

What Is TOMS?

The Tour Operators’ Margin Scheme UK (TOMS) is a special VAT scheme designed for businesses that buy in and resell travel services, such as accommodation and transport, without materially changing them. The TOMS VAT scheme for Airbnb hosts is often misunderstood, but it’s crucial to understand how it works to avoid costly VAT mistakes.

Rather than charging VAT on the full sale price, you only pay VAT on the margin, which is the difference between what you paid the supplier and what your customer pays you. This is particularly relevant for those researching TOMS for Airbnb hosts.

This can lead to significant VAT savings if used correctly.

To qualify, your business must meet ALL of these criteria:

Example:
You purchase 5 nights from a hotel for £100/night and resell those nights on Airbnb for £150/night. You make a £50 margin per night. VAT is only due on that £50, not the full £150. This is exactly what the TOMS VAT scheme Airbnb model is designed for.

Why Most Airbnb Hosts Don’t Qualify

In most cases, Airbnb and serviced accommodation businesses do not qualify for TOMS. Here’s why:

1. You own or lease the property
   If you own the property or hold a long-term lease (e.g. 3 years), you’re not buying a travel service. You’re running a property rental business, which disqualifies you from TOMS for Airbnb hosts.
2. You materially alter the accommodation
   HMRC states that if you furnish, decorate, or make any significant internal changes, you’ve materially altered the accommodation. This disqualifies you from the TOMS VAT scheme.
3. You’re providing accommodation, not reselling a travel product
   Even if you’re offering short stays, if you’re not reselling an existing travel product (such as a hotel room or serviced apartment), your service doesn’t meet the Tour Operators’ Margin Scheme UK criteria.

The Sonder Case: A Key Precedent

In early 2025, the UK Upper Tribunal ruled against Sonder, a large serviced accommodation operator. Despite using Airbnb-style leasing and subletting, the tribunal concluded the following:

• Their long leases were not “bought-in travel services”.
• Furnishing the properties amounted to material alteration.
• Therefore, TOMS could not apply.

This case reinforces HMRC’s strict interpretation. If you own or lease a property and then furnish or alter it, you are outside the bounds of TOMS for Airbnb hosts.

What Disqualifies You From TOMS?

If your setup doesn’t meet HMRC’s strict criteria, your business model likely doesn’t qualify for the TOMS VAT scheme for Airbnb hosts.

Tip: Even if the TOMS VAT scheme Airbnb doesn’t apply, other options for Airbnb VAT UK savings may include flat rate VAT schemes or tailored company structuring. You should explore this with an accountant who understands VAT for serviced accommodation.

Risks of Getting It Wrong

If you incorrectly apply TOMS:

• HMRC may demand backdated VAT, interest, and penalties.
• It can also trigger compliance investigations or disputes.

TOMS should never be used without a proper VAT analysis, especially in the context of Airbnb tax advice UK, where the line between resale and service provision can be unclear.

Final Thoughts

TOMS can be a powerful VAT-saving tool, but it’s not for everyone. Most Airbnb hosts in the UK will not qualify, especially if they own or lease and furnish their properties.

However, if you are willing to operate like a travel operator. That means sourcing short-term accommodation and reselling it without modification. In that case, the TOMS VAT scheme for Airbnb hosts may be worth a closer look.

Need Help Structuring Your Business for VAT?

At Hill Bookkeepers, we help short-term let businesses navigate VAT schemes like TOMS for Airbnb hosts.Book a free consultation today to see if TOMS, the Flat Rate Scheme, or another VAT approach could help reduce your tax bill.

Need help managing your finances? Contact us today for expert bookkeeping services!

Learn more about HMRC’s guidance on the Tour Operators’ Margin Scheme.