Travel companies will escape the additional “significant” cost burden of having VAT changes imposed on them under the our Operators Margin Scheme (Toms) – for now at least.
Abta welcomed the decision by HMRC to maintain current rules on the operation of Toms in the UK.
But writing for Travelweekly.co.uk today, tax expert Damon Wright warned the industry not to be complacent.
“There may, ultimately, be a sting in the tail, as it looks like the European Commission is re-launching its review of Toms across the EU,” he said.
“However, as Commission reviews can often take several years to complete, HMRC has reserved the right to review its position in a year.”
Abta head of finance, CRM and corporate services Carolyn Watson today welcomed the move by HMRC not to implement any immediate changes to Toms in the UK.
HMRC is due to issue a business briefing with details of its decision on Friday.
Watson said: “This is excellent news for many of our members who might have faced very significant costs if they had been bound to implement the changes resulting from the European Court of Justice rulings on wholesale travel arrangements and global margin calculations.
“It is also really positive that HMRC has taken on board the potential disruption to these operators of making changes which may yet be reversed or amended when the EU Commission eventually reviews the scheme.
“Abta will continue to work closely with HMRC and the EU as they look to review their position on how to apply and amend the scheme in the future.”
The court ruled in September that Toms VAT should apply to wholesale tour operators – who supply other businesses rather than sell to consumers – across the European Union.
Up to now, Toms has applied to wholesale suppliers in some EU countries and not in others, including the UK.
The decision would have affected the margins of inbound tour operators, ground handlers and conference and event organisers whose business-to-business activities have previously been zero-rated for Toms.
It could have also hit many smaller UK outbound tour operators as it may have ended a long-standing arrangement which allows these companies to avoid Toms on the transport portion of a European package holiday (typically the flight).
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