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The calculations required under the TOMS

The European legislation on which the UK TOMS was originally based laid down (as at 31 December 2020) that the taxable amount is the margin achieved by the tour operator¹. The relevant UK legislation similarly provides that the value of a designated travel service shall be determined by reference to the difference between sums paid or payable to and sums paid or payable by the tour operator in respect of that service, calculated in such manner as HMRC specifies².

HMRC has laid down two methods of calculation; the simplified method and the standard method (see below). Both calculations provide provisional output tax figures based on the margin achieved in the previous financial year, corrected by an annual adjustment in the first VAT return ending after the year end. The financial year is the year for which the business prepares its financial accounts. The margin is subject to VAT