The Tour Operators’ Margin Scheme (TOMS) is a simplification scheme for businesses that buy in and resell travel, accommodation, and certain other services as a principal or undisclosed agent. Under the TOMS, you cannot reclaim any UK or EU VAT charged on the travel services/goods you buy in and resupply. The tax on such goods or services is accounted for in the relevant EU member state by the providers of those services (hotels, airlines and so on). But as a tour operator based in the UK, you only account for VAT on the margin you make on your Margin Scheme supplies. That is, the difference between the amount you receive from your customer and the amount you pay your suppliers.
A voucher is an instrument (in electronic or physical format) where:
- there is an obligation to accept it as consideration or part consideration for a supply of goods or services, and
- the goods or services to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instruments
From 1 January 2019, new rules and definitions apply. There rules split vouchers into two categories:
- Single-purpose vouchers (SPV)
- Multi-purpose vouchers (MPV)
Single purpose vouchers are those which carry the right to receive only one type of goods or services, and are all subject to one single rate of VAT. Multi-purpose vouchers are everything else.
The most important distinction is whether a voucher is a single purpose voucher or multi-purpose voucher. If it is a multi-purpose voucher, then little has changed. If it is a single purpose voucher, however, HMRC will now charge VAT when it is issued.
VAT treatment of single-purpose vouchers (SPV)
The issue of a SPV and each subsequent transfer of a SPV are subject to VAT at the rate that applies to goods or services to which the voucher relates.
The VAT is due in the VAT period in which it is sold.
Where a SPV is not redeemed or partially redeemed no adjustment can be made in respect of the non-redemption.
VAT treatment of a multi-purpose vouchers (MPV)
VAT is only chargeable when a MPV is redeemed for the underlying supply of goods or services. The handing over of the goods or actual provision of the services in return for a MPV is a supply for VAT purposes.
No VAT is due on the issue, transfer or supply of a MPV.
The rate of VAT applicable on redemption of a MPV is the rate applicable to the underlying goods or services supplied.