The tour operators margin scheme, also known as a TOM’s Scheme, is a way in which businesses that buy and re-sell travel, accommodation and other services within the tour/travel sector can simplify the VAT process, this is because in many cases it enables VAT to be accounted for on travel supplies without businesses having to register and account for tax in each Member State where the services and goods are enjoyed.
Most commonly the TOM’s scheme covers:
- Passenger transport
- hire of a means of transport
- Trips or excursions
- Services of tour guides
- Use of special lounges at airports
However, even if this is not your main business venture, or you wouldn’t usually consider yourself a ‘tour operator’ the scheme may still apply, for example if you are:
- A hotelier who buys in coach passenger transport to collect its guests at the start and end of their stay
- A coach operator who buys in hotel accommodation in order to put together a package
- A company that arranges conferences, including providing hotel accommodation for delegates
How does the VAT Tour operation margin scheme (TOMS Scheme) work?
If you are registered for VAT, you must normally account for tax on the full selling price of your supplies, but you can then reclaim the VAT which was charged on purchases.
Under the TOMS VAT scheme, you cannot reclaim any UK or EC VAT charged on the travel services and goods you buy-in and re-supply – the tax on such goods or services is accounted for in the relevant Member State by the providers of those services (hotels, airlines and so on).
However, as a tour operator based in the UK, you only account for VAT on the margin you make on your margin scheme supplies.
The margin scheme supply, is essentially, the difference between the amount you receive from your customer and the amount you pay your suppliers, which means it is your designated travel service, I. e. a service which is bought in from another person and re-supplied without alteration and is then supplied by a tour operator from an establishment in the UK, for the direct benefit of a traveller.
The talent and experience the team at Dyer & co. possess means they will be able to provide high-quality advice whenever you or your business requires more in depth information regarding TOM’S Schemes or tour operations margin scheme calculation.