VAT – Tour Operators’ Margin Scheme
A new business brief relevant to tour operators and other businesses that provide travel services has been published. The brief refers to a specific piece of VAT legislation known as the Tour Operators’ Margin Scheme (TOMS).
TOMS is a special scheme which allows businesses to avoid having a VAT registration in each EU jurisdiction where they provide travel services and packages. Using the scheme the supply of qualifying travel is taxable at the standard rate whilst the tour operator accounts for VAT on the profit margin in the EU country where they are based.
The way the UK operate this scheme was questioned by the European Commission who opined that certain parts of the scheme were not fully in line with the European VAT Directive.
Following a consultation period, HMRC have now agreed to amend TOMS to fully comply with EU law. The changes which will take effect from 1 January 2010 mainly relate to the following:
- supplies to business customers for subsequent resale;
- supplies to business customers for their own consumption and supplies of educational school trips;
- use of market values in respect of in house supplies.