Recently issued regulations should ensure that in the event of the UK leaving the EU in a no-deal Brexit scenario, changes can be made to UK legislation to prevent double taxation when supplies of travel services are made.
TOMS (the Tour Operators Margin Scheme) is a mandatory EU wide-simplified VAT accounting scheme for tour operators that buy in and sell on travel services such as passenger transport and hotel accommodation. As it stands, for UK businesses the margin on travel services enjoyed in any EU Member State (including the UK) is subject to the UK standard rate of VAT and the margin on travel services enjoyed in the rest of the world is zero-rated.
When the UK exits the EU, it is intended that the margin on all travel services enjoyed outside the UK, which will then include the EU, will continue to be zero-rated. Under this legislation, UK tour operators will be able to continue applying a version of TOMS for services enjoyed in the UK.
This law affects UK businesses who supply travel services enjoyed in other EU Member States. It is possible that in the event of a hard Brexit some EU countries will require UK based tour operators to register for VAT for supplies of travel services made in their country. This will have to be reviewed once the position is known. However, if that is the position those UK businesses might have increased reporting obligations to meet.
Contact our VAT experts now and find out how this change could affect your business.