For those unfamiliar with the Tour Operators’ Margin Scheme (TOMS), the rules apply where any UK business buys in and sells on travel services in its own name without material alteration anywhere in the world. In the UK, HMRC define these travel services as tourist accommodation; transport; excursions; car hire; guides; and use of airport lounges. They can also include catering and admission (plus “similar services”) if supplied within a package with one or more of the first six. The effect of TOMS is, broadly speaking, that:
- The supplier is unable to recover any input VAT on direct costs of sales; and
- The supplier charges VAT on the direct margin made, at the standard VAT rate for UK travel and the zero VAT rate for non-UK travel.
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