HM Revenue and Customs Brief 05/14
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Issued 31 January 2014
VAT: Tour Operators Margin Scheme (TOMS) - position following
European Court of Justice (ECJ) infraction decisions
Purpose of this Brief
The purpose of this Brief is to explain how UK tour operators
and other businesses supplying travel services will be affected by
these ECJ decisions.
Who needs to read this Brief
Tour operators and other businesses who buy in and sell on
various travel services, either on their own, or packaged with other
supplies such as conference or training facilities.
Accountants, consultants and others who provide VAT advice to
the businesses referred to above.
The Tour Operators Margin Scheme (TOMS) is a mandatory EU VAT
accounting scheme for businesses which buy in and sell on certain
travel services, such as passenger transport, hotel accommodation and
car hire. Under normal VAT accounting rules, businesses which supply
these services in several Member States would have to register, recover
VAT on their costs, and account for VAT on their sales in each Member
State in which they make supplies. Under TOMS, they cannot recover any
VAT on the services they buy in, but only account for VAT on their
profit margin in the Member State where they are established.
In the UK, we only apply TOMS to supplies to final consumers
or to businesses for their own consumption (for example, business
travel for employees). Travel services supplied to another business for
onward sale ('wholesale' supplies) are subject to normal VAT rules.
We also require businesses to carry out their TOMS calculation
annually using global figures for the year as a whole.
The ECJ decisions
The EU Commission initiated infraction proceedings against
eight Member States (Spain, Poland, Italy, Czech Republic, Greece,
France, Finland and Portugal) in connection with their operation of
TOMS, and the ECJ released its decision in these proceedings on 26
September 2013. The Court ruled that:
- wholesale supplies should be covered by TOMS
- the TOMS calculation should be carried out on an
individual transaction basis
These decisions are binding on all Member States. However,
after careful consideration, we have decided that there will be no
changes to the operation of TOMS in the UK at this stage, and that
businesses should continue to follow existing guidance. This is because:
- the EU Commission has indicated an intention to carry out
a review of TOMS, which may result in significant changes to the scheme
- making changes now, which may be modified or reversed in
future, would be particularly disruptive and costly for business
We will review this after a year.
It is open for any business to apply direct effect and operate
TOMS in accordance with the Court's decisions. For example, it is
possible that some tour operators may gain a benefit from including
wholesale supplies within TOMS, in which case they may choose to do so
if they wish.
Full guidance on TOMS is given in VAT Notice 709/5, 'Tour
Operators Margin Scheme'. The treatment of wholesale supplies is
explained at paragraph 3.1, and details of the margin scheme
calculation are at sections 5 and 8 to 12.
About the Author
© Crown Copyright 2014.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
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Article Published/Sorted/Amended on Scopulus 2014-02-03 13:10:34 in Tax Articles