Use TOMS or not to account for VAT on Wholesale Travel Supplies?

A case which will interest many across the travel industry will be the report from the Tribunal relating to Golf Worldwide Holidays Ltd. As we know a decision from the First Tier does not create a precedent that other can rely upon and the taxpayer may well choose to appeal to the Upper Tribunal as well - it has 56 days from the decision date to do so, but it speaks to the complexities of VAT in the travel and tour operator sector and the challenge when deciding the VAT route to take.

The point from this case is that the taxpayer, originally decided to account for VAT on it's wholesale sale of travel services through the use of the Tour Operators Margin Scheme (TOMS). Following a case in the European Court relating to whether TOMS could be used for both wholesale, as well as retail, supplies of travel services, HMRC issued a business brief which gave providers the choice on using TOMS or the standard VAT accounting treatment to do so. They have also included in the Travel Operators Public Notice 709/5, section 3 the comment that businesses involved in wholesale supplies have a choice on the matter.

However, the issue arising from this recent case - a full report of which can be found here - is that whilst the taxpayer decided that in retrospect, it would have been better, financially, to use the standard VAT accounting treatment for these supplies, the decision of the Tribunal was that it had made it's choice and effectively - had to live with that decision. The Tribunal felt it had not made an "error" in accounting for VAT which it was able to now go back and change it's mind over.

A reminder, if one were needed why it is important to consider the VAT implications for any transaction planned in business before it's undertaken.

We appreciate that VAT has it's complexities, that why here at Centurion - Xeinadin's Indirect Tax team - you have an experienced team of VAT and Environmental Tax specialists here to help - we also have a direct specialism in complex areas such as the Travel and Tour Operators sector.

When VAT gets complicated for your organisation then get in touch - IndirectTax@xeinadin.com or call on 0330 124 7740.

This article is for general information only and specific advice should be sought as required.