RSM, the leading audit, tax and consulting firm says that any UK travel-based businesses operating in the EU after 29 March 2019 could see changes to the VAT accounting under the Tour Operators Margin Scheme (TOMS), should the UK face a ‘no-deal’ Brexit.
Travel providers, tour operators and other business involved with buying and reselling travel, accommodation and other associated costs within the EU, and who are required to operate the Tour Operators Margin Scheme (TOMS) could be affected.
Sandy Cochrane, indirect tax director at RSM, comments: ‘Travel companies operating in the EU should be mindful of any potential VAT changes post-Brexit. A no deal scenario could have implications to the amount of UK VAT to be accounted for by HMRC, and this could mean changes to the amount of VAT payable.’
According to RSM, TOMS calculates the VAT that is to be accounted for by taking the VAT from the margin of holidays taken within the EU, including the UK. However, if there is a no deal Brexit, HMRC has suggested that for UK established tour operators, or those business that are required to account for UK VAT by using the TOMS method, UK VAT will only be accounted for on the margin of UK holidays. Accordingly, where a business is predominantly involved in holidays that take place outside of the UK but within the EU, the VAT amount payable could reduce.
However, Sandy Cochrane is quick to point out that static or reduced VAT will not necessarily apply across the board. ‘With VAT and TOMS, the devil is in the detail, as other costs and income may need to be considered, such as the impact of any ‘in-house’ supplies and where this stock is located for example.
‘We would urge UK businesses operating in the EU to start scenario-planning or stress-testing their balance sheets if they have not done so already. Ahead of any potential changes to VAT post Brexit, businesses should verify any revised calculations.’
RSM also notes that with Making Tax Digital (MTD) coming into effect on 1 April, HMRC could use the milestone as a mechanism to review existing VAT calculations and raise assessments.
For any further information visit https://www.rsmuk.com/what-we-offer/by-service/tax/vat-and-indirect-tax.