Tour Operators Margin Scheme (TOMS)

Tour Operators Margin Scheme (TOMS) is a special Value Added Tax (VAT) accounting scheme that applies to businesses involved in supplying travel and tour services. TOMS is designed to simplify the VAT process for businesses that buy and sell certain travel services as part of a package.

Here are some key points about TOMS VAT:

Scope of TOMS:

  • TOMS applies to businesses that buy in and resell travel, accommodation, and certain other services as part of a tour package.
  • It is primarily used by tour operators and travel agents who package and sell travel services.

How TOMS Works:

  • Under TOMS, VAT is calculated on the profit margin (the difference between the selling price and the cost of the travel services) rather than on the full selling price.
  • VAT is only due on the margin earned by the tour operator.

Services Covered:

  • TOMS applies to services related to travel, such as accommodation, passenger transport, and certain other services like guided tours.

Invoicing:

  • Tour operators using TOMS must issue VAT invoices that show the margin (the difference between the total cost and the selling price) along with the VAT due.

VAT Rates:

  • The VAT rates used under TOMS are determined by the location of the customer (the place of supply rules).

Input VAT:

  • Businesses using TOMS are generally unable to reclaim the input VAT they incur on the travel services they purchase.

Record Keeping:

  • Proper accounting records must be maintained to support TOMS calculations and VAT declarations.

Adjustments:

  • Adjustments may be required for changes in the cost or selling price of the travel services after the initial sale.

Margin Scheme Calculations:

Compliance and Audits:

  • Tour operators using TOMS are subject to VAT compliance and may be subject to audits by tax authorities.

EU and Non-EU Transactions:

  • TOMS applies to transactions within the EU, and similar schemes may apply to travel services outside the EU.

It is important for businesses using TOMS in the UK to stay updated with any changes in VAT regulations. Consulting with a tax advisor or accountant with expertise in TOMS VAT in the UK can help ensure proper compliance with the scheme.