Operating TOMS

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Operating TOMS
  • VAT registration
  • VAT groups
  • Input tax
  • Place of supply of services
  • VAT treatment of margin scheme supplies
  • Airline charter scheme
  • Agency option
  • Trader to trader (wholesale) scheme
  • Hotel bill back
  • Supplies of passenger transport
  • Accounting and TOMS

This guidance note provides more detailed information on how TOMS operates. It should be read in conjunction with the Overview of the Tour Operators Margin Scheme (TOMS), TOMS and in-house supplies and TOMS calculations guidance notes.

VATA 1994, s 53; VATA 1994, Sch 8, Group 8, item 12; SI 1987/1806; SI 1995/2518, reg 14(1)(n); VAT (Tour Operators) (Amendment) Orders 1990, 1992, 1995 and 2009; HMRC Notice 709/5 ; De Voil Indirect Tax Service V3.591–V3.596 (subscription sensitive); 2006/112/EC , Articles 306–310
VAT registration

If a business is providing designated travel services and needs to determine whether it needs to VAT register, the following will be treated as taxable turnover:

  • total margin achieved on all taxable supplies (zero-rated, standard-rated and reduced-rated)
  • full value of any taxable (including zero-rated) in-house supplies
  • full value of any taxable agency commission
  • full value of any other taxable (including zero-rated) supplies made within the UK

For more information on registering for VAT, see the Overview – registering for VAT and VAT registration procedure guidance notes.

VAT groups

Businesses that are members of a UK VAT group can make margin scheme supplies. However a business making margin scheme supplies cannot belong to a UK VAT group if any of the other group members:

SI 1987/1806, Article 13
  • has an overseas establishment
  • makes supplies outside of the UK that would be taxable (including zero-rated) if made within the UK
  • makes supplies of goods / services that are intended to, or will become, margin scheme supplies (which are for resale, whether or not by the other member concerned)

More on Margin schemes: