Tour Operators Margin Scheme (TOMS)

The TOMS is a mandatory scheme which applies to supplies made for the direct benefit of the traveller.

Changes have come into force for businesses which have to perform TOMS calculations.  There are four changes businesses need to be aware of.

-    TOMS time of supply rules for the VAT rate change
-    Removal of the opt-in for business-to-business supplies for resale
-    Removal of the opt-out for supplies to businesses for their own consumption and the provision of school trips
-    The option to use a market value, i.e. equivalent selling price, rather than the cost based method.

TOMS time of supply rules

TOMS has its own time of supply rules, which differ from the normal rules.  An operator must choose one of two methods to work out the tax point for margin scheme supplies and any in-house supplies sold within a margin scheme package.

Method 1 uses the date of departure of the traveller or the first date on which the traveller occupies any accommodation, whichever happens first.
Method 2 uses the date of receipt of payment of a certain size. A tax point is created when a payment is received which exceeds 20 per cent of the selling price.  A tax point is also created each time the payments received to date, which have not already been accounted for, exceed 20 per cent when added together.
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Input tax and output tax

Under TOMS, tour operators cannot recover any UK or EC VAT charged on the travel services bought in and resold.
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Effect of removal of opt-in

Removal of the opt-in and application of the normal rules mean that, where tour operators have not previously recovered VAT on goods and services supplied to them for the direct benefit of the traveller, they may recover that VAT from 1 January 2010 for supplies being made after this date.  Equally, from 1 January 2010 they should account for output tax on supplies made after this date on the full value of the supply.
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For further information, please contact our VAT Director, Sharon Crush sharon.crush@creaseys.co.uk