We recently had news of the FTT case decision in Golf Holidays Worldwide Ltd, which concerns the application of TOMS to wholesale services. In this case, Golf Holidays accounted for VAT on its wholesale travel packages under TOMS, and then later submitted an error correction to HMRC for overpaid VAT under TOMS, on the basis that it should not have been using the TOMS rules for wholesale services. Outside of TOMS, many wholesale operators get a great VAT position because, when selling wholesale travel packages to non-UK businesses for onwards resale, it is often possible to get the "Holy Grail" of VAT, which is to charge no VAT on sales, but achieve full input VAT recovery on the related UK purchases. We have written about this opportunity before, so please see here for details if you are a wholesaler and are not currently taking advantage of this position.
HMRC had denied the VAT repayment. The reason behind this was due to a legacy VAT position from the UK's time in the EU. In 2011, the ECJ decided in the decision of Kingdom of Spain (and others) that wholesale services should be subject to the TOMS rules. The UK never formally adopted this decision whilst we were in the EU and indeed since leaving the EU it is clear from HMRC's guidance note Notice 709/5 (see below) that wholesale services should not be in TOMS. However, whilst in the EU, HMRC confirmed that businesses could chose to apply "direct effect" of EU legislation and treat themselves within TOMS if it was advantageous to do so.