20 Jul

ABTA TOMS post Brexit round table

ABTA was very pleased to host an informal round table meeting this week, on behalf of the Department for Digital, Culture, Media and Sport (DCMS) to discuss the possible impact of the UK’s exit from the EU on the taxation of travel services provided by UK established travel agents and tour operators. Representatives from DCMS and HMRC attended the meeting along with a cross-section of ABTA Members both large and small. DCMS had requested the meeting as part of their Brexit work, as they wished to gain a greater understanding of the potential issues that could affect the travel industry post-exit with respect to VAT and in particular the Tour Operator Margin Scheme (TOMS).

Members were asked about their key EU exit concerns, the outcomes they hoped to see for TOMS, how such an outcome could be implemented, outcomes to be avoided and more general questions regarding their TOMS/EU exit issues and concerns.

The main concern that was raised by Members if a margin scheme such as TOMS was not retained was the increased and costly administrative burden that would ensue from registering for VAT in multiple EU countries and filing returns in each. From Member experience there is a practical difficulty of obtaining VAT compliant invoices from EU based suppliers, which would result in inability to claim back legitimately incurred VAT, increasing costs and reducing already very tight margins.

There was a consensus that any future scheme must avoid double taxation and facilitate simple administration. It was also agreed that a minimal lead-time of at least two years would be required for the industry to effect any changes without significant financial risk due to brochure pricing, systems changes etc. Generally, a margin scheme such as TOMS would be preferred, preferably based on where the supplier is established and the margin should be calculated on a global basis, rather than transaction by transaction. Moreover, any changes must maintain the UK’s current position in respect to taxing the margin on transport services at the zero rate of VAT. It was also noted that any action taken in respect of the UK’s position following Brexit should, to the extent possible, align with the EU position on the taxation of travel services, both now and in the future if reform results from the EU’s current TOMS study.

DCMS and HMRC explained that they were not able to provide specific information currently regarding the future of TOMS or even VAT, as this would evolve as the negotiations in Brussels progress. However, it was important that they understood the impacts of any potential changes following Brexit, and they had found the discussions with ABTA Members very useful in informing their work.

For a complete guide to VAT and TOMS in travel, don't miss our seminar in Manchester on 15 November 2017 - register now.