Travel VAT and the Tour Operators’ Margin Scheme

A business’ VAT position can often be key to its profitability. In the travel industry, the VAT rules can be particularly complex and frequently changing, often meaning it is difficult to keep track, and to ensure VAT efficiency.

Tour Operators’ Margin Scheme (TOMS)

The Tour Operators’ Margin Scheme (TOMS) is a VAT accounting scheme that applies to businesses that buy-in and re-sell travel, accommodation and certain other services as principal or undisclosed agent.

The scheme was originally designed as a VAT simplification so that from a UK business’ perspective an operator would not be required to register for VAT in the EU states where they would be buying travel services from and then reselling them in the UK. Instead, the operator would only need to be UK VAT registered and would pay VAT or zero rate its profit margin according to the destination of the travel.

The way TOMS rules apply to tour operators changed when the UK left the EU in January 2021. The UK still applies the TOMS rules for supplies made from a UK business establishment and it now requires the payment of VAT only on margins relating to UK holidays and UK travel.

The margin on travel outside the UK, including the EU is zero-rated. The UK VAT treatment of travel services falling outside TOMS is unchanged.

There is on-going discussion across the EU as to whether members states will seek to require non-EU based travel businesses to register for VAT in the country where they are buying and selling on accommodation or travel services. VAT issues remain a focus therefore for our travel industry clients.

At Elman Wall Xeinadin Group we have many years of experience with the TOMS rules and know how important the correct application of TOMS is for your business. Where TOMS is a complication or a cost, we look to reach a better outcome either within TOMS (for example, considering the transport company scheme, or optimising a business’ in-house split), or in some cases outside of TOMS altogether.

Tour Operators’ Margin Scheme
Travel Tax

Other travel VAT issues

We understand that businesses within the travel industry are concerned about more than just TOMS and have had much experience advising on other common industry issues such as the merits of agency vs principal, input VAT recovery, the VAT place of supply, agency billback and VAT on credit card fees.

As part of the Xeinadin Group, we have a close collaboration with Xeinadin’s inhouse specialist VAT team. Directors Liz Maher OBE and Andrea Brindley provide their VAT and TOMS expertise and work closely with our Accounts & Audit team, who oversee TOMS reporting for over 200+ travel businesses.

They will be helping our clients navigate the very complex and changing VAT waters and are supported by our well-known industry expert travel VAT advisor David Bennett, who will still continue to consult with Andrea and Liz on travel VAT matters, in order to provide the best service and advice to our travel clients.

They have gone the extra mile in offering added value services, yielding tangible savings or other commercial benefits for our business.

Mel Childs

Finance Director, Reader Offers Limited

We have been with Elman Wall for 15 years, since our humble beginning. They have bought a depth of knowledge to our business helping us every step of the way with our development. I would highly recommend them to any business.

Dimitri Patrikios

Managing Director, Ionian Island Holidays Ltd

We changed our auditors to Elman Wall a few years ago, as our previous accountant did not have specific travel industry experience. It was the best thing we could have done.

Marilyn Roberts

Financial Director, Jetline Travel

They are always my first port of call on all things financial and tax. They are always proactive, professional, and helpful.

Ade Taiwo

Finance Director, Global Travel Collection UK

...Elman Wall Xeinadin Group have been with us every step of the way. Their proactive approach, led by a highly skilled and knowledgeable leadership team has ensured all advice we have received has been relevant to our situation at the time and they continue point us in the right direction as we continue to grow. Quick educated responses to our requests always with a smile.

Mel Phaure

Director, Blue Cube

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Audit & Assurance

Travel VAT & TOMS