It’s certainly seems that serviced accommodation (“SA”) is the noisy kid in town at the moment; particularly in connection with the Tour Operators Margin Scheme (TOMS). If you’re not familiar with the TOMS, it’s a scheme for holiday operators to calculate VAT on their sales. Serviced accommodation and the TOMS are very common topics.
Tour Operators Margin Scheme
Before we get into the technical details, remember the main points of the TOMS:
- The scheme primarily exists so that tour operators, holiday companies etc don’t have to register for VAT in every EC country they buy TOMS services, e.g. holiday accommodation for a package holiday. They only have to register for VAT in the country from which their business is run.
- The TOMS applies to “bought in” accommodation and travel, with certain other services such as trips and car hire.
- You can’t claim any VAT charged, whether by UK or non-UK suppliers.
- However you only pay VAT on the profit margin of your selling price.
- Services provided from your own resources (e.g. if you run your own hotel rather than buying in hotel accommodation) are treated under normal VAT rules. These services are called “inhouse” supplies.
- If you sell both TOMS and inhouse supplies, you have to apportion your sales price so that you can calculate VAT separately on TOMS supplies and inhouse supplies.
- For VAT registration purposes, you only include the profit margin of your TOMS sales, not the full value of the TOMS sales.
In most cases, if you buy in and sell on any sort of hotel accommodation, this would fall under the TOMS. For VAT purposes, SA is treated like hotel accommodation, so providers of SA may find that some or all of their sales fall under TOMS.
But what exactly is “accommodation” and how do you know if it applies to your business?