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HM Revenue and Customs Brief 05/14


HM Revenue and Customs -Tax Authorities

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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 in future
  • 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.

Direct effect

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.

Further information

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.

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Article Published/Sorted/Amended on Scopulus 2014-02-03 13:10:34 in Tax Articles

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