Glossary · UK
What is Tour Operators' Margin Scheme?
A special VAT scheme where travel businesses account for VAT only on their profit margin, not the full price of bought-in travel services.
Full Definition
The Tour Operators' Margin Scheme (TOMS) is a compulsory VAT accounting method for businesses that buy in travel services - such as accommodation, transport or trips - and resell them to travellers in their own name without material alteration. Instead of charging the standard 20% VAT on the full selling price, the business accounts for VAT only on its margin, the difference between what it charges customers and what it pays suppliers. This avoids the need to register for VAT in every country where services are supplied. A key feature is that the business cannot reclaim input VAT on the bought-in travel services covered by the scheme. TOMS applies to tour operators, travel agents acting as principals, and many other businesses that incidentally resell travel, such as conference organisers. The detailed calculation rules and place-of-supply treatment are complex, so affected businesses should follow current HMRC guidance and consider professional advice on margin computation and annual adjustments.