UK delays reform to Travel Agent TOMS VAT scheme
- 3 February 2014 | Richard Asquith
The UK is to delay changes to its Travel Operators Margin Scheme (TOMS) despite a ruling from the European Court of Justice (ECJ) that is was in breach of the EU VAT Directive.
ECJ finds UK TOMS in breach of VAT Directive
The ECJ ruled last September that the UK and a number of other EU countries (Spain, Italy, Greece, Poland, France, Portugal and Finland) were not applying the TOM scheme as intended. Specifically, it found that the TOMS scheme should include wholesale tour operators – not just direct sales to consumers. The implication of this is the wholesale providers (including tour operators, conference organisers) will lose their zero UK VAT rating. These players will lose their right to not pay VAT on flight costs booked for the tour operator, and moving the calculation methodology to a transaction-by-transaction basis from the simpler annual assessment. These changes could cost the industry up to 3% of operators’ cost base.
UK to delay reform
Despite this case lost, the UK’s HMRC has now declared that it has been granted approval to delay any reforms as the EC plans to review the whole TOMS system. HMRC said it will review the EC’s plans in one year’s time.