What do I need to know about TOMS as a travel agent?

Question

Please can you go through the basics of TOMS, specifically if UK travel agents should be paying VAT on EU based input costs

Answer

Hi Will,
Bit of a wide ranging question so I suggest some background reading for you in HMRC Public Notice 709/5/09 – so it might narrow down the issues for you. Liz

Answer

TOMS is a special scheme for businesses that buy-in and re-sell travel, accommodation and certain other services as a principal or undisclosed agent (that is, acting in your own name). In many cases it enables VAT to be accounted for on travel supplies without businesses having to register and account for tax in each Member State where the services and goods are enjoyed.

If you are registered for VAT, you must normally account for tax on the full selling price of your supplies, but you can reclaim the VAT charged on purchases (subject to the normal rules). Under the TOMS, you cannot reclaim any UK or EC VAT charged on the travel services and goods you buy-in and re-supply – the tax on such goods or services is accounted for in the relevant Member State by the providers of those services (hotels, airlines and so on).

However, as a tour operator based in the UK, you only account for VAT on the margin you make on your margin scheme supplies, that is, the difference between the amount you receive from your customer (including any amounts paid on behalf of your customer by third parties) and the amount you pay your suppliers.

Answer

If you act as a disclosed agent in the making of margin scheme supplies (that is, you name the provider of the margin scheme supplies), you are not yourself making margin scheme supplies and so you must normally account for any VAT on your commission under the normal rules (not using the TOMS).

VAT Notice 709/5 – Tour operator’s margin scheme provides detailed information in this area:

https://www.gov.uk/government/publications/vat-notice-7095-tour-operators-margin-scheme

Section 4 advises on the circumstances when you can reclaim VAT charged to you. This includes VAT incurred in other Member States on your overheads and on purchases relating to your in-house supplies, subject to the conditions set out in VAT Notice 723 – Refunds of VAT in the European Community for EC and non-EC traders. Please note you must reclaim any such VAT from the appropriate VAT authorities in the other Member State(s) concerned.

HM Revenue & Customs

Customs International Trade & Excise

www.hmrc.gov.uk/contactus

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