Value Added Tax

Tour Operators Margin Scheme (TOMS) ― structuring considerations

Produced by Tolley
  • 22 Dec 2021 18:44

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

  • Tour Operators Margin Scheme (TOMS) ― structuring considerations
  • The transport company scheme
  • The agency scheme
  • The charter scheme
  • Business-to-business supplies
  • Practical points ― TOMS structuring considerations

Tour Operators Margin Scheme (TOMS) ― structuring considerations

This guidance note looks at a potential structuring considerations associated with mitigating VAT costs under the Tour Operators Margin Scheme (TOMS).

For an overview of the TOMS more broadly, see the Tour Operators Margin Scheme (TOMS) ― overview guidance note.

For further commentary on the TOMS, see De Voil Indirect Tax Service V3.591–V3.594.

The transport company scheme

Under the TOMS, VAT must be broadly accounted for at the standard rate on the profit margin of ‘designated travel services’ when these are enjoyed in the UK. Designated travel services can include passenger transport, accommodation, catering, etc which are bought in and resold by a tour operator (this is explained further in the Tour Operators Margin Scheme (TOMS) ― supplies covered by the scheme guidance note). This means that a tour operator may end up having to account for VAT on the profit margin for passenger transport supplied as part of a package with (for example) accommodation, catering, etc. However, this passenger transport would (if not supplied under the TOMS) probably qualify for zero-rating. The zero-rating for passenger transport is covered in the Passenger transport ― zero and reduced-rating guidance note.

Under the transport company scheme, a tour operator sets up an associated transport broking company which buys in transport from the transport provider and sells this onto the tour operator. The supply from the associated transport company to the tour operator should be zero-rated (subject to meeting the relevant conditions) and it can be treated outside the

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