TOMS reviews - could you be due a VAT repayment?

TOMS reviews - could you be due a VAT repayment?

I think I can say with some confidence that 2020 has not been the best year for the travel industry (or, indeed, perhaps anyone!?). Though many are sadly looking at very few sales this year, we always want to ensure that businesses are in the best VAT position, and one way in which we have seen businesses receive some fairly sizeable VAT refunds this year is through TOMS reviews, which often result in a VAT repayment.

TOMS is an area that can be complicated, and this can lead to errors with calculations, especially where the calculation hasn't been looked at for some time. I have found that the majority of these errors are overpayments of VAT, perhaps because businesses are over-cautious with such a complex area or simply not aware of how some savings may be made within the TOMS calculation. This is pretty understandable - it does feel like a minefield sometimes, with very little guidance available! I know I talk a lot about the importance of getting VAT right and optimising it - a TOMS review is quite a straightforward and cost effective way of checking whether you have overpaid and, if so, is the first step to quantifying a refund and getting it paid back.

Over the past few months, we have submitted a number of error notifications for businesses for repayments of VAT following TOMS reviews. The reasons for the repayments are all very different, which I hope shows you just how may variables there are within TOMS:

  • Business A: Treating countries such as Turkey, the Canaries Islands and Norway as EU;
  • Business B: Treating its own event management fee as subject to TOMS rather than outside the scope of UK VAT as a supply made to non-UK businesses.
  • Business C: Treating in-house guiding income within TOMS when it should be outside the scope of UK VAT.
  • Business D: Accounting for VAT based on date of payment, and margin under the VAT registration threshold.
  • Business E: Wholesale business which should not be within TOMS.
TOMS reviews - could you be due a VAT repayment?

These are just my real life examples from TOMS reviews over the last few months. There are many many more areas within TOMS which can result in businesses overpaying VAT and which we identify within a TOMS review. I think this can be really worth looking into, and had paid dividends for the businesses mentioned above, plus many more over the years! Where VAT has been overpaid under TOMS (or indeed in any other area of VAT) remember that repayments can be sought from HMRC for the past four year period, and usually a little bit longer for TOMS repayments. This can really add up and may give a much-needed lifeline this year.

Of course, a TOMS review may not necessarily lead to a repayment of VAT, and in some cases may be the opposite or may find no real difference. These cases however are very few and far between from my experience.

It is worth noting that, as the end of the Brexit transitional period looms, we are likely to see a significant change in the way TOMS VAT applies going forward. This is now under consultation and we are expecting HMRC to confirm fairy watch this space for news! However, this doesn't change the past position and these refund opportunities will still exist for a few years to come.

If you would like to discuss a TOMS review, please do get in touch with me - or 07971 642789.