Tour operators face VAT ‘nightmare’ as TOMS rules change

Wholesale tour operators are likely to face a “VAT nightmare” as the true impact of changes to VAT under the Tour Operators’ Margin Scheme (TOMS) begins to emerge.

The European Union rules, which come into force on January 1 2010, mean operators who buy hotel stock, transport or activities to sell onto other businesses will have to register and account for VAT in the country where the product is located.

For operators who buy stock throughout Europe, this means registering in 27 countries where VAT ranges from 6% to 25%.

It remains unclear whether the rule will apply to operators who sell wholesale packages.

After months of uncertainty about the implications of the changes, HM Revenue and Customs issued a guidance note for operators on November 24.

However, this has now been withdrawn from its website for minor changes.

Fiona Colledge, VAT manager at James Cowper accountants, said: “It could take operators two or three months to get registered, so in the meantime, they will have to make sure they are allowing for different VAT rates within their costs.

“Operators are likely to pass these costs on to the end user, whether that’s another tour operator or a travel agent.”