HMRC have published Revenue and Customs Brief 5 (2024): 'Tour Operators' Margin Scheme (TOMS) for business-to-business (B2B) wholesale supplies' and confirm these supplies are within the scope of the TOMS.
With immediate effect the Revenue and Customs Brief 5 (2014): Tour Operators Margin Scheme (TOMS) is withdrawn and Tour Operators Margin Scheme (VAT Notice 709/5) is amended.
The TOMS is a mandatory VAT accounting scheme for businesses which sell and buy in certain travel services such as passenger transport, hotel accommodation and car hire. It means tour operators cannot recover VAT on the services they buy in, but must instead account for VAT on their profit margin. HMRC's policy provides tour operators with a choice about whether or not to apply the TOMS to B2B wholesale supplies and this policy remains unchanged.
To date, services supplied to another business for onward sale, referred to as 'wholesale' supplies have been subject to normal VAT rules but by concession, they could be included in the TOMS.
Following a First Tier Tribunal case, HMRC has had to revise its approach with B2B wholesale supplies and has confirmed they are within the scope of the TOMS. By concession, tour operators may opt B2B wholesale supplies out of the scheme.
Useful guides on this topic
Margin scheme
The VAT margin scheme allows businesses to calculate their output VAT liability on the profit margin they make on the goods they sell.
Place of supply: Services
The first step to identifying the correct place of supply of a service is to establish if the service is a business-to-business supply (B2B) or business-to-consumer supply (B2C).
Flat rate scheme
What is the VAT Flat Rate Scheme (FRS)? Who can apply? How do you apply? What are the rules? What are the rules for capital expenditure and pre-registration VAT?
Annual Accounting
What is the VAT annual accounting scheme? How does it work? Who can use it? What are the conditions?
Time of supply (Tax Point)
The time of supply of goods or services determines the date on which VAT becomes due. There are a number of different rules which must be considered.
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