UK and EU TOMS review "updates"
posted 9th January 2025
A happy new year to everyone! We start 2025 as we mean to go on – providing “not-particularly-insightful” updates on UK and EU TOMS as the reforms rumble slowly on at snail’s pace with no real news. As many of you know, the UK and EU are reviewing the workings of their respective TOMS rules with a view to changing some or all of the principles. Although there is no breaking news, we are often asked to share updates by businesses who are, quite rightly, concerned as to whether any changes will affect their budgeting for the coming years’ business.
.
UK TOMS Reform
In early 2024, HMRC announced that they were carrying out a review as to the workings of the UK TOMS system. As part of the process of engaging with businesses and advisors, we had a discussion with HMRC in the Spring of 2024 to share our views on how this may affect businesses. HMRC were keen to understand the following points:
- How TOMS is working for Tour Operators since Brexit?
- What, if any, concerns we have about the workings of the scheme currently and whether anything within it could be streamlined?
- In the post-Brexit world, what are the benefits and disadvantages of keeping TOMS in terms of administration and VAT accounting?
We contacted all our clients and our feedback to HMRC, similar to I’m sure that of many other advisors, focused on:
- Advantages of UK TOMS such as the ease of calculating VAT under one liability for large quantities of transactions, not having to obtain purchase invoices, the advantageous position for sectors who do not have input VAT to recover, practical issues such as timings and valuation.
- Difficulties such as disadvantages for the MICE sector, accuracy with raising invoices valuing TOMS and in-house supplies, transport companies, uncertainty of the annual adjustment for businesses with fluctuating margins, HMRC’s own guidance.
- Other considerations such as optional calculations, updating TOMS in the digital age, simplification and the question of whether UK TOMS applies to non-UK businesses.
The HMRC Officer appeared respectful of our views and keen to engage. He also mentioned that they would be considering the position on wholesale supplies and wholesale packages as part of this review.
HMRC had initially thought they may provide an update in the Autumn, but we understand that this was not the case. As such, I contacted HMRC this week to share business’ concerns that a lack of news was affecting planning. HMRC notes and appreciate these points and have confirmed that they will not be making any changes to the operation of the TOMS without first having a wider consultation/call for evidence with the industry. HMRC confirmed that this also applied to any changes to wholesale travel too. They were not able to give a timeframe for this wider involvement at this stage.
From this, we consider that it is likely that the timeframe for the UK TOMS review may be longer than first thought. We also perhaps read from this that HMRC are waiting for the outcome of the Sonder and Bolt cases (which were both heard separately at Upper Tier Tribunal in December) before anything material is decided.
Once we do have any news about the next step, we will of course send out a mailshot inviting businesses to participate in the consultation.
EU TOMS Reform
We previously wrote in detail about the EU TOMS Reform and the possibilities which may arise from this. This remains very important to UK Businesses. At present, it has become fairly clear that the EU consider that TOMS applies to third countries such as the UK, meaning that currently it is not generally expected that UK businesses selling travel which meets the EU local conditions for EU TOMS will be required to register locally in the EU. However, this, amongst other elements, may change once a TOMS Reform is agreed, and so it is important for UK businesses selling travel in the EU to follow this review closely.
At the TTL conference we attended in Majorca in November, we heard from a representative from the EU Commission. It was clear here that although there was no set timeframe for the reform at present, it is very clearly on the Commission’s agenda and being actively worked. As such, we expect to hear further developments this year.
I appreciate that this is a very long-winded way of saying we have no update, however we think it is important to set out the current position for both of these reviews to ensure that businesses are aware of how things are proceeding and can plan appropriately.
Please contact us if you would like to discuss TOMS or other VAT matters