TOMS and in-house supplies

By Tolley

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

  • TOMS and in-house supplies
  • In-house supplies
  • Place of supply
  • Accounting for VAT on in-house supplies

In-house supplies

Tour operators may not always purchase margin scheme supplies from a third party where they may make the supply using their own resources. These are called 'in-house supplies' and are defined as:

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 , Arts 306–310
  • a supply made from the business' own resources
  • items that have been purchased by the business but have been materially altered or further processed so that the eventual supply is substantially different from the original item purchased

The following provides an overview of the main VAT treatment of supplies of in-house transportation services.

Coach / rail

Businesses making supplies including any of the following goods or services will be viewed as a supply of passenger transportation:

  • coach / train transport where the tour operator owns or hires the mode of transport
  • providing a driver
  • fuel and insurance
  • arranging repairs and maintenance, etc

It will be viewed as a supply of passenger transportation as the business has pulled together a number of separate elements to supply the transportation services. This type of transportation has not been acquired by the business without material alteration, therefore it cannot be treated as a margin supply under TOMS. The VAT treatment will need to be determined and VAT charged where applicable using the normal VAT rules.

Air transport

Businesses can make in-house supplies of air transportation in the

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