European tour operators hit by 1 January VAT change, says accountants James Cowper 
Tour operators purchasing hotel accommodation or event tickets in the EU are to be hit by changes to the Tour Operators Margin Scheme (TOMS).
The concession allowing tour operators to include their wholesale supplies within the margin scheme will be withdrawn from 1 January 2010 and must be accounted for under normal VAT rules. This means that if the place of supply is another Member State then the operator may be required to register and account for VAT there.
Fiona Colledge, a VAT Manager at Thames Valley accountants and business advisers James Cowper LLP, said: “If a tour operator buys and sells, for example, hotel accommodation across all 27 EU countries this could give rise to a requirement to register and account for VAT in each of those countries with effect from 1 January.
“These changes have only just been clarified by HMRC with the issue of the new TOMS Notice last Thursday (26 November) leaving tour operators little time to prepare for these changes. To make matters worse this guidance has now been temporarily withdrawn from the website while HMRC make further changes to it.
James Cowper expects many operators to struggle to meet the 1 January deadline as it will involve operators first registering in each of the relevant countries, establishing the correct rates of VAT to account for, and then updating their financial systems. This will also give them an ongoing compliance issues to file regular VAT returns.
“Tour operators should, irrespective of whether they have managed to register in individual countries or not, begin to allow for the rates of VAT locally from 1 January,” adds Fiona. Operators should also remember that they cannot issue VAT invoices until they are registered.
In addition, arrangements which allowed certain supplies to local authorities for educational trips to be excluded from TOMS has also been withdrawn, meaning that such supplies must now be accounted for through TOMS.
Fiona Colledge, James Cowper LLP, Tel: 01635 35255 or email fcolledge@jamescowper.co.uk
04.12.2009