Last updated: 16 October 2026
What is TOMS?
The Tour Operators Margin Scheme (TOMS) is a special VAT scheme for businesses that buy in travel services, such as accommodation, flights, coach hire and excursions, and resell them in their own name. Instead of charging VAT on the full selling price, you account for VAT only on your margin: the difference between what you charge the traveller and what the bought-in travel costs you.
Who has to use TOMS?
TOMS is compulsory, not optional, if you:
- buy in travel services from other businesses and resell them to travellers
- act as a principal or an undisclosed agent (in your own name)
- supply the services without materially changing them
It applies to tour operators, travel agents acting as principal, event organisers, schools and clubs arranging trips, and businesses selling conference packages including hotels. It does not cover travel services you provide using your own resources, such as your own coaches or hotel, which are “in-house supplies” taxed under normal rules.
How VAT is worked out
| Travel enjoyed | VAT on margin |
| In the UK | Standard rate: VAT is 1/6 of the margin (VAT-inclusive) |
| Outside the UK | Zero-rated |
| Mixed packages | Margin split between UK and overseas elements |
You cannot reclaim input VAT on the bought-in travel services (the “designated travel services”), but you can reclaim VAT on your general overheads, such as office rent and marketing.
Worked example
Coastline Tours sells a UK weekend break for £600. It buys in hotel accommodation for £400 and coach travel for £80. Its margin is £120. VAT is £120 × 1/6 = £20. If the holiday had been in France, the margin would be zero-rated and no VAT would be due.
Provisional and annual calculations
During the year you use a provisional margin percentage, usually based on the previous year, to account for VAT on each return. At the year end, you do an annual calculation based on actual figures and adjust any difference on the next return.
VAT registration
Your turnover for VAT registration purposes is based on your total sales, not only the margin. The registration threshold is £90,000 of taxable turnover in a rolling 12 months. Zero-rated overseas margins still count as taxable supplies.
Selling to other businesses
Supplies of travel to another business that will resell it (wholesale supplies) can be excluded from TOMS and taxed under the normal rules. Supplies to businesses for their own use, such as a company conference trip, usually remain within TOMS in the UK.
Common mistakes
- Treating agency commission and principal sales the same way
- Reclaiming input VAT on hotel bills that are part of a package
- Forgetting the annual adjustment
- Including in-house supplies in the margin calculation
Frequently asked questions
Do I show VAT on my invoices under TOMS?
No. You should not show VAT separately on invoices for TOMS supplies.
Does TOMS apply if I sell only one trip a year?
Yes, if you buy in and resell travel as principal.
Can I opt out of TOMS?
No, except for wholesale supplies.
Do I need special software?
Not necessarily, but accurate records of costs per package are vital.
Related: the VAT margin scheme for car dealers, VAT on hospitality and gifts and travel expenses you can claim.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with Tour Operators Margin Scheme VAT. See our VAT accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
