Call for evidence on VAT treatment of travel services including TOMS

The government is looking to improve and simplify the current application of VAT to travel services; this includes reviewing the Tour Operators Margin Scheme (TOMS). 

The review will also consider the VAT treatment of services that fall outside the TOMS. This will include travel services enjoyed in the UK but supplied by tour operators based outside the UK. 

Background

In 2024, HMRC sought views on TOMS from industry trade bodies and advisers about how it was working and what areas were a cause for concern. This was following earlier simplification proposals in 2017 from the Office of Tax Simplification (OTS). 

Additionally: 

• Tour operators and representative bodies had also asked HMRC to reinstate features removed following European Commission challenges.
• HMRC had noted reports of increased overseas sales of UK-based travel services resulting in the avoidance of UK VAT. 
• Limited changes were made to ease the UK's EU exit transition, with a further review intended. 

All of these factors have led to the current call for evidence in which HMRC are seeking opinions on the VAT treatment of travel services, including both current UK provision and potential alternative VAT accounting mechanisms. 

The views and opinions gathered will help shape the direction of the future policy and legislative frameworks. 

Call for evidence

The call for evidence has highlighted five key points that respondents should consider when answering questions: 

• Is the TOMS, as it currently stands, fit for purpose?
• Is the TOMS a distortion of the VAT system?
• If the TOMS were withdrawn, how would UK businesses be impacted?
• Could the TOMS be made to work better for UK tour operators if it were reformed?
• Views on the supply of travel services made outside of the TOMS. 

The call for evidence covers three distinct areas: 

• The Tour Operators Margin Scheme (TOMS)
• Travel services supplied outside of TOMS
• Travel services supplied by overseas suppliers for consumption in the UK. 

The call for evidence is aimed at those who supply travel services, including businesses using TOMS, tour operators established outside of the UK and wholesalers of travel services. 

Customers who use travel services generally for business trips, but particularly business customers in the 'Meetings, Incentives, Conferences and Events' (MICE) sector, may also be interested in this call for evidence.

The call for evidence closes on 31 January 2027. Responses should be sent by email to This email address is being protected from spambots. You need JavaScript enabled to view it. 

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Call for evidence for the review of the VAT treatment of travel services, including the Tour Operators Margin Scheme (TOMS).

Question 1: What is the primary activity of your business (Optional: Standard Industrial Classification (SIC) Code, if known)?

Question 2: Approximately what proportion of your UK turnover relates to services currently accounted for under the Tour Operators’ Margin Scheme (that is excluding in-house supplies)?

Question 3: Approximately what proportion of your Margin scheme supplies are consumed in the UK and thus liable for VAT at the standard rate?

Question 4: Do you use the Wholesale opt-out (paragraph 3.2 of Notice 709/5) from the TOMS?

If so:

• Approximately what proportion of your travel supplies have you opted to treat as wholesale?
• Approximately what proportion are supplied to tour operators based outside the UK for consumption in the UK?
• What were the approximate values of these supplies?

Question 5: Broadly, how would you describe the mix of customers for whom you apply the TOMS?

• Mainly consumers (B2C).
• Mainly businesses who sell on the supplies to consumers (B2B).
• Mainly businesses who consume your supplies themselves (B2BC. Paras 3.1 and 3.3 of VAT Notice 709/5 refers).
• A mix of the above

Question 6: Which of the following best describes the VAT position of your business?

• VAT registered as turnover always above the VAT threshold.
• VAT registered as turnover around threshold.
• VAT registered voluntarily, meaning turnover below the threshold.
• VAT not registered as turnover below threshold.

Question 7: Approximately what proportion of services that your business buy in from suppliers (such as accommodation, transport, or activities) are standard-rated?

Question 8: Over the last 12 months, when assembling travel packages, how often did your business buy in services (such as accommodation, transport, or activities) from:

• UK suppliers that were not VAT registered?
• Suppliers of accommodation that were exempt from VAT?
• And what was the approximate value of these supplies?

Question 9: Does your business sell travel services to, or buy travel services from, tour operators established outside the UK?

Question 10: Do you supply travel services to be consumed within the UK from outside the UK? If so, what is the approximate value of sales made to:

• UK Consumers.
• Non-UK consumers.
• Don’t know.

Question 11: Are there any features of the current VAT treatment of travel services that you believe materially affect prices, margins, or business decisions, but which are not well understood from published data?

Question 12: Has the move from bricks and mortar establishments to online selling changed the dynamics of the TOMS from that initially envisaged?

Question 13: If the dynamics have changed, do respondents have any thoughts as to changes they’d like to see to the scheme to reflect that?

Question 14: How would withdrawal of the TOMS and of the easements (paragraph 2.5) affect your business or the sector?

Question 15: What effect would withdrawal have on the net VAT accounted for?

Question 16: What factors should the government take into consideration when looking at this option?

Question 17: What is your view on partial withdrawal of the TOMS for certain supplies? Which supplies do you think should be excluded and which included?

Question 18: What modifications or simplifications would you like to see to the TOMS as it currently stands?

Question 19: What do you see as being the pros and cons of making the TOMS optional?

Question 20: If the TOMS is optional, what are respondents’ views on whether it should be on a transaction-by-transaction a whole-business basis?

Question 21: Do you think the use of the TOMS for travel services bought in from non-VAT-registered suppliers, or where the VAT liability is different from what is supplied, is distortive of the VAT system? Please explain your thinking.

Question 22: How do you think such a distortion (if any) could be addressed?

Question 23: Can you suggest amendments on the calculation mechanism? Please explain in detail how any suggestion might work.

Question 24: What factors do respondents consider they would require guidance on (with or without legislative backing) to facilitate a transition out of the TOMS in either scenario?

Question 25: What length of time would respondents view as being reasonable to transition out of the TOMS in the case of withdrawal or partial withdrawal. What factors lead to this view?

Question 26: Respondents are invited to comment on the potential distortion of the tax in respect of packaged supplies and provide their thoughts on how this issue might be tackled.

Question 27: Respondents are invited to comment on the definition of a ‘packaged supply’ of travel service and how it should be treated.

Question 28: Do respondents consider that there should be a single rule that is mandatory for all travel packages made outside of the TOMS; if so, what form should that take?

Question 29: If not a mandatory mechanism, then how do respondents consider the question should be approached?

Question 30: Do respondents have a view on the treatment of overseas tour operators and the objective to ensure that the right amount of VAT is accounted for in the UK?

Question 31: Do respondents have any views on the current working of the repayment claim block and whether they have any suggestions for improvements?