There have been a number of changes in the travel VAT world recently.
Firstly, in the UK, HMRC asked for views on whether the TOMS scheme was working satisfactorily since Brexit. Together with the ICAEW, I made comments and suggestions to HMRC, asking them not to make any changes that could influence the European Commission to make changes to EU rules that would adversely affect UK tour operators. We were thinking of Croatia’s requirement that non-EU tour operators cannot rely on TOMS and so have to register for VAT there if they are sending travellers to Croatia. Germany has postponed a similar requirement a couple of times but it is something that the Commission are considering as part of an ongoing review of TOMS in the EU. If UK tour operators had to VAT register in every country where they send travellers, this could be a logistical and costly nightmare.
HMRC acknowledged our concerns and indicated that they would consult more widely later in the year. However, unexpectedly, HMRC then issued changes to the Tour Operators’ Margin Scheme VAT notice 709/5 in mid-April 2024. One change was to require B2B suppliers, both supplying services to be consumed by the business (for example, a business trip by an employee) and also services sold to businesses for subsequent resale (B2B wholesale supplies), to use TOMS. There is an opt out for B2B wholesale suppliers if they wish to opt out of TOMS. Previously, B2B suppliers were outside TOMS with an opt in.
The changes also imply that non-UK tour operators selling UK travel services B2C have to register for VAT in the UK. We have asked HMRC to reconsider this because it could encourage the EU to make similar changes requiring UK tour operators to register in the EU.
In further news, the European Union countries have been considering bringing in new rules relating to platforms that are involved in supplies of accommodation (like Airbnb and villa agencies) or passenger transport (like Uber or Bolt). Known as VAT in the Digital Age or ViDA, these new rules would require the platform to register and pay local VAT on the supply of the villa or apartment or on the transport where the owner/transport provider did not. The rules were expected to apply from January 2026 but the countries failed to agree at May’s ECOFIN meeting and therefore they will be discussed again at the June meeting.
Accommodation and transport platform operators do however need to comply with UK reporting requirements in place from 1 January 2024 – more information is available here:
Back in the UK, businesses in the serviced accommodation sector are waiting for the Upper Tribunal to hear the Sonder case on whether TOMS can apply. The case is listed for hearing in December. HMRC lost at the First Tier Tribunal (FTT). Similarly, Bolt won their FTT case to apply TOMS to bought in and resupplied taxi services. HMRC have appealed that decision.
If you would like to discuss any of these VAT issues, please contact Sue Rathmell, VAT Partner at MHA by email at sue.rathmell@mha.co.uk.
*The views expressed are the author's and not ICAEW's