Event Doctor: TOMS - Events in Europe

For a slightly better understanding on the implications of TOMS VAT calculations, and its importance with event planning in the EU.

In this Event Doctor’s episode, we discuss, how to simplify the complexities and confusion that often surround the understanding of the Tour Operators’ Margin Scheme – aka TOMS.

There is so much (often conflicting) information out there, it’s no surprise that the minute we, the creative event planners, hear “TOMS”… we run as far away as we can!

However, TOMS – if it’s explained in a way that we can relate to, as event planners, then it may not be as scary for us in the future.

Knowing where the experts are to guide you, and when to call upon them is crucial information regarding this tax scheme.

So, grab a brew, find a quiet spot, and dedicate the next few minutes on mastering the essential basics of TOMS.

TOMS

However, whilst the kettle boils, it’s important to recognise that this blog provides our interpretation of the VAT scheme in question. In all cases, we highly recommend that you seek guidance from your own VAT expert for any specific situations you may encounter.

Please note that we are not functioning as experts in this field, and this blog should not be considered a substitute for professional advice.

TOMS, what the heck is it…?

The Tour Operators’ Margin Scheme: TOMS, is a special VAT (Value Added Tax) accounting scheme that applies to tour operators in the European Union (EU).

Tour Operators We Hear You Say…

TOMS is not just for tour operators. It’s relevant for all businesses involved in the travel and tourism industry. It’s therefore relevant to everyone in the UK, who organise events within the EU, when certain triggers are met (we will explain these TOM’s triggers shortly).

TOMS – A brief history

TOMS was introduced in the European Union (EU) in 1992. Since its introduction, it has undergone various updates and refinements to align with changing VAT regulations and industry practices.

What about Brexit?

Currently several EU member states have questioned the zero-rating of TOMS supplies by UK operators, because it prevents local VAT from being charged and collected within the EC Single Market. This has brought forward suggestions that “UK TOMS” cannot be applied to supplies in the EU. Instead, UK operators would need to register in the Member States where relevant, therefore collecting VAT on behalf of that tax authority. It was thought that by the end of 2023, changes relating to this would have been implemented, yet nothing has changed for the UK.

Latest TOMS discussion

News recently emerged of a delay in the anticipated TOMS scheme review, initially set for this year but now postponed until 2024 due to pressure from influential EU members, notably Germany. The expected initial findings and proposals, initially due by late 2023, may not materialise, causing frustration among EU states, especially regarding non-EU suppliers offering TOMS services in the EU.

In response, Germany had considered imposing its VAT measures on non-EU travel companies but delayed this in anticipation of an accelerated EU review. Further delays could prompt Germany to proceed with its plans, potentially requiring non-EU suppliers to register for VAT in Germany, setting a possible trend for other EU countries. Monitoring TOMS developments is crucial.

Why are “Travel Services” relevant to event organisers?

TOMS was put in place to simplify the way VAT is accounted for and calculated on certain travel services in each EU state. Travel services are such things as:

Package holidays (tour operators)
Tours (tour operators, but also event organisers who may be planning mid-conference day tours)
Organised events (tour operators, but also event organisers, creating networking opportunities with visits to local tourist hot spots for example).
Hotel accommodation – (Tour) Operators, including event organisers, if we are planning to put just one keynote speaker or all the delegates in a hotel as part of the event.

NO! – “Really Why”’… We hear you?

The reason and purpose of TOMS is to stop the need for ‘travel service’ providers from having to register VAT in each country they operate in. It’s a positive and helpful accounting tool, created to help all in the EU operate throughout the EU.

So, whenever you, as event planners’, venture into organising EU events that include, as part of the experience, any relevant elements (see below), TOMS is designed to simplify the VAT.

Where in the world is this relevant?

If you are organising events that are held outside of the EU, they typically would not fall under the scope of TOMS. TOMS is specifically designed for transactions within the EU. Therefore, if your events are taking place entirely outside the EU, you would generally not be subject to the TOMS rules for those events.

However, if your events involve services both inside and outside the EU, you may need to consider the VAT rules for each part of the transaction separately. In such cases, it’s essential to consult with a tax advisor or a tax authority in the relevant EU member state to ensure compliance with VAT regulations.

It’s also worth noting that VAT rules and regulations can be complex and subject to change, so it’s advisable to stay updated and seek professional advice to ensure compliance with the specific requirements that may apply to your situation.

What does TOMS cover? The Relevant Elements

In a nutshell…the main contenders are: with a few more outside this shell (not the exhaustive list!)

Travel services – like accommodation, if competes with hotels (not usually available to the public for reward).
Passenger transport
Airport lounge use
Organised trips
Organised tours
Services provided for the benefit of the traveller’s experience. For example, such as an all inclusive meal upgrade, use of an exclusive beach club.

What are the TOMS Triggers relevant to organising events?

We understand that when organising events in the EU and dealing with TOMS, the triggers and considerations are like those for travel services. Here’s how they apply specifically to event organisers:

Event Packages:

TOMS can apply when you offer event packages that combine various services such as accommodations, transportation, and event-related activities as a single package to your customers.

Services in the EU:

TOMS is triggered when the event services are provided within the European Union. If your event spans multiple EU countries, you’ll need to consider TOMS for each part of the event taking place within the EU.

Event Organiser Role:

You must operate as an event organiser or agent, arranging and selling event packages to end customers, combining various services into a single package.

No VAT Recovery:

Just like in the case of travel services, event organisers using TOMS cannot reclaim VAT on their inputs (e.g., costs associated with providing event services).

Accommodation Included:

If your event package includes accommodations, it’s a common trigger for TOMS, and VAT on the accommodation is generally calculated within TOMS.

EU Event Services:

Services targeted at attendees traveling within the EU, whether they are EU residents or non-EU visitors, fall within the scope of TOMS.

Thresholds:

Some EU countries may have thresholds that determine whether TOMS applies based on the total selling price of the event package.

When organising events in the EU, it’s crucial to be aware of TOMS and its triggers to ensure proper VAT compliance. Given that tax regulations can vary between EU member states.

In Layman’s terms…(if that’s possible when talking VAT!)

Under TOMS, businesses calculate and pay TOMS VAT only on the margin they make on the difference between their purchase and sale prices for travel and tour packages that accompanies the event.

This scheme is mainly applicable to services related to travel, accommodation, and certain other services supplied as part of a travel/delegate package within the EU.

TOMS’ relevance for event organisers

Imagine you run an event management/agency company, and you often arrange trips, tours, or events for your clients or delegates during a conference for example. When you provide these services, there are various components involved, such as accommodation, transportation, and activities. Each of these components might have its own VAT rate, and calculating VAT for each one individually can be complicated. This is where TOMS comes in:

Standard VAT Rate:

Under TOMS, you typically apply the standard VAT rate to the profit margin. This rate may vary depending on your country’s tax regulations, but it’s usually the same rate for all your services, making it easier to manage.

Inclusions and Exclusions:

TOMS applies to certain services related to running events, such as accommodation, transportation, and certain activities. However, it doesn’t apply to services like event planning or consultancy, which are usually subject to regular VAT rules. So, it is purely there for the added extras of ‘Travel Service’ – listed above.

Customer Invoices:

When you invoice your clients, you typically include the total price of the event package, including VAT, if applicable. You’ll then account for the VAT under TOMS when you file your tax returns. The margin is estimated monthly or quarterly and calculated precisely once a year.

Record-Keeping:

It’s crucial to keep accurate records of your transactions, including the costs you incurred and the income you generated from the event packages. This will help you correctly calculate your VAT liability under TOMS.

TOMS simplifies the way VAT is applied but it’s essential to understand the specific rules and regulations in the country you operate from, as they can vary, and consulting with a tax professional or accountant is advisable to ensure compliance.

Q – Is TOMS compulsory? A- Yes…

TOMS is a compulsory VAT accounting scheme for those that fall within the criteria, so considering recent (and forever changing) developments, businesses should take stock, and consider whether they could be affected by TOMS, now or in the future.

In the UK, Under TOMS, the taxpayer accounts to HMRC for output tax on the margin. Input tax on costs of sales is not deductible. Input tax on overheads is deductible as is input tax on inhouse costs.

The main advice would be to check no changes to TOMS have been implemented as a first step. This could affect event organisers who operate from the UK into the rest of the EU member states.

Cross-Border Considerations:

If your event organisation operates in multiple EU member states, be aware of cross-border VAT implications and any special VAT rules that apply in each country.

Consult a VAT Expert:

Given the complexity of VAT rules, consider consulting with a VAT expert or tax advisor who specialises in EU VAT regulations to ensure compliance.

It is essential to consult with your own VAT expert or legal counsel for specific advice tailored to your situation, as our understanding may not cover all intricacies or recent changes in the regulations.

Keep in mind that VAT rules can change over time and may vary by location, so consulting with tax authorities or seeking advice from experts is crucial to ensure compliance with the latest regulations. Please be aware that this information is provided for general guidance and should not be considered the definitive authority on VAT matters.

Useful links and reference for the above content:

HM Revenue & Customs (HMRC) – UK: The HMRC website provides detailed information on TOMS as it applies to businesses in the United Kingdom. You can find guidance documents and resources here.

https://www.gov.uk/guidance/tour-operators-margin-scheme-for-vat-notice-7095

https://www.vatcalc.com/eu/eu-overhaul-of-tourism-operators-vat-scheme-2023-toms/

https://www.etoa.org/operating-in-europe/tax-and-tourism/toms/

https://www.abta.com/news/farewell-toms-be-careful-what-you-wish

Event Doctor: TOMS – Events in Europe