When I originally wrote my first version of this TOMS VAT guide way back in 2017, it was the first article I ever published on LinkedIn and I was really blown away by how many people read it, and gave me feedback on how helpful it had been. It struck me recently that people may still be relying on the VAT advice within the article, and TOMS has changed in a few important ways since Brexit, so here is "TOMS VAT Calculation Examples 2.0 - the post-Brexit edition".
The TOMS VAT calculation can be a bit of a mountain to climb. Post-Brexit, that mountain has reduced substantially, so we'll now call it a medium sized hill. However, it is still a strange variation to the normal VAT rules, and can still be a bit tiring without the right equipment. The good news is that in about 95% of cases, once the TOMS calculation has tailored for your business, and the relevant data is gathered from systems, the calculation itself is a reasonably straightforward annual process with a couple of extra sums in the in-year quarterly VAT returns. So here I have provided some of the basic equipment needed for TOMS VAT hill climbing which will hopefully give you a bit of a leg up...
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.