Does the Tour Operators Margin Scheme (TOMS) affect you?

Does the Tour Operators Margin Scheme (TOMS) affect you?

If you immediately answered ‘No‘ because you are not a Tour Operator, then you could be mistaken. TOMS has become more and more relevant to local authorities, their schools, and other public bodies.

Whilst historically, it was considered not relevant (by virtue of its misleading name!) it could apply if you are making supplies of conferences, seminars or experience days that include supplies covered by TOMS, such as:

  • accommodation
  • passenger transport
  • hire of vehicles
  • trips or excursions
  • tour guide services

The risks of getting the Tour Operators Margin Scheme wrong (or not doing it)

It is a legal requirement to use TOMS if you are making supplies the scheme covers (margin scheme supplies) as an undisclosed agent or principal. It should be noted that TOMS applies to all VAT-registered entities and not just Tour Operators, so knowledge of when it applies will be invaluable to local authorities and other public bodies for future VAT Compliance. A lack of knowledge in TOMS will lead to the following risks:

  • Incorrectly declaring too much output tax on the full value of these supplies.
  • Paying too much VAT on TOMS supplies (you don’t account for VAT on all income from TOMS supplies).
  • Deducting input tax on costs relating to TOMS supplies.
  • Claiming VAT costs incurred making TOMS supplies (you’re not allowed to).

Additionally, if HMRC suspect TOMS applies a thorough review of supplies made by the local authority may be carried out. This will lead to delays in any repayments due and again potential assessments with penalties (if applicable).

How PSTAX can help you

PSTAX can provide your organisation with a firm grounding in the basics that apply to this commonly misunderstood area of VAT. It will benefit local authorities in the following ways:

  • Raise awareness of this complex area of VAT, helping identify whether it applies
  • Identify the differences between Agent and Principal which is key to the application of TOMS. (This knowledge will be useful in other areas of VAT applicable to public bodies.)
  • Enabling local authorities and other public bodies to consider more fully the VAT implications of future events they organise.

Read more about our VAT services

Written by Russell Nevard

View all by Russell Nevard