VAT – Tour Operators Margin Scheme
HMRC have published a new business brief (Revenue & Customs Brief 21/10) relevant to tour operators and other businesses that provide travel services. 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 to register for VAT in every EU jurisdiction where they provide travel services and packages. Using the scheme the supply of qualifying travel is taxable at the standard rate. The tour operators account for VAT on their profit margin in the EU country where they are based.
New TOMS rules came into effect on 1 January 2010 to fully comply with EU law. As a consequence of these new rules HMRC has published a new business brief setting out details of an agreement reached with the business travel sector about invoicing supplies under ‘hotel billback’ arrangements.
These new arrangements are available to business travel agents that wish to adopt them and should alleviate problems which have arisen since the new rules were introduced in January 2010.