UK: Changes To TOMS Legislation What This Means For You

Numerous businesses involved with the organisation of events do not realise that the compulsory new Tour Operators Margin Scheme rules apply to them. Business-to-Business transactions now within TOMS

HMRC amended the Tour Operators Margin Scheme (TOMS) legislation from 1 January 2010 to bring it into line with EU requirements. However, some 20 months after the change we are aware that a number of businesses involved with the organisation of events and conferences may not have appreciated that these new rules apply to them or that the application of the TOMS to their activities is compulsory.

What is TOMS and how do I comply?

TOMS is a special VAT scheme that applies to businesses that buy-in and re-sell accommodation, transport, event tickets and certain other services as a package. This includes events and conferences.

For the organisers of events and conferences the changes will result in additional VAT costs as input VAT is not recoverable on the purchase of TOMS supplies and VAT cannot be charged on the sale of the package to the business customer; instead it is calculated on the profit margin. Costings for events and conferences will need to be revisited and prices will need to be adjusted to include VAT rather than be charged at a VAT exclusive rate.

Moves by HMRC

We understand that HMRC has recently become aware that many event and conference organisers making business-tobusiness sales are not yet compliant with the new rules. In order to avoid or reduce any penalties, which can be up to 30% of the VAT under-declared, we advise you to put your house in order before HMRC makes enquiries.

What should I do next?

Having successfully worked on a number of these cases, the specialist VAT team at Smith & Williamson is able to offer a review of your activities to analyse the impact of this change on your business. We can advise on the implementation and operation of TOMS procedures to ensure your business is fully compliant, and suggest ways to mitigate the impact of increased VAT costs. We can also assist in making a voluntary disclosure to HMRC for any underpaid VAT. There is still time to correct the situation in relation to future business as the calculations are dealt with on an annual basis.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.