Accountants for travel agencies and tour operators
Sell travel you have bought in, in your own name, and VAT falls on your margin rather than on the price your customer pays.
That is the Tour Operators’ Margin Scheme, or TOMS. For sales to travellers it is not optional, and it changes your VAT bill, your invoices and even whether you have to register at all. We set it up from your contracts, run the quarterly figures and do the year-end calculation for travel agents, tour operators, destination management companies (DMCs), and coach and event operators. Fixed monthly fees from £129 plus VAT, with a named, qualified accountant.
Which travel businesses does TOMS catch?
- Travel agents selling in their own name
- Sell a hotel or a flight as your own product and you are a tour operator for VAT, whatever the sign above the door says. HMRC is explicit that what matters is how you act, not what you call yourself. You can run two streams at once: travel sold in your own name inside TOMS, and bookings made as a disclosed agent outside it, where VAT on the commission follows the normal rules. We split the two from your contracts, not from your invoice template.
- Tour operators building packages
- Bought-in accommodation, transport, excursions and guides are Margin Scheme supplies. Anything you provide from your own resources, such as a coach you own or a guide you employ, is an in-house supply, taxed under the normal rules inside the same calculation. Splitting a package between the two, by market value where one can be established and by cost where it cannot, is the part that needs the most care.
- DMCs and inbound operators selling to other travel firms
- Ground arrangements you sell to overseas operators who resell them are wholesale supplies. HMRC’s position, confirmed in April 2024, is that they fall within TOMS but that by concession you may opt them out. Opt out and the normal rules apply instead: accommodation is taxed where it is situated, passenger transport where it takes place. Which route suits you depends on your margins and your input VAT, so we model both before you choose.
- Coach, conference and event operators
- HMRC’s own examples include a coach operator that buys in hotel rooms and a company that arranges conferences with hotel rooms for delegates. Your own coaches are in-house transport, and a conference you build from hired rooms, equipment and staff is an in-house supply, but delegate hotels and transport you buy in are Margin Scheme supplies. And since 2 January 2026, taxi and private hire journeys are outside TOMS unless they are ancillary to accommodation or bus, coach, train, ship or air travel you also supply.
Does the £90,000 threshold use my sales or my margin?
Your margin. For deciding whether you must register, or may deregister, HMRC counts the total margin on your Margin Scheme supplies, including zero-rated ones, plus the full value of any taxable in-house supplies, taxable agency commission and other taxable sales you make in the UK. Not the money that passes through your account. Illustration, not a real client: Rosa runs a small tour company from Bristol selling walking holidays in Italy, and sells nothing but travel she buys in.
- Taken from customers over the year
- £400,000
- Less flights, hotels and transfers bought in
- £340,000
- Margin, which is her taxable turnover for VAT
- £60,000
- VAT registration threshold
- £90,000
Rosa sits below the threshold despite £400,000 going through the bank. Her tours are enjoyed outside the UK, so her margin is zero-rated and no UK VAT is due on it. Zero-rated margin still counts towards the threshold, though, so £60,000 is the number she watches, not nil. She cannot reclaim the VAT on the £340,000 she bought in. Whether your own contracts work this way depends on what you have signed, and it is the first thing we settle.
Where does TOMS usually go wrong?
None of these is exotic. Each one breaks a rule in HMRC’s own notice on the scheme, which is why they are worth checking before an inspection does it for you.
- Reading gross bookings as turnover
- The registration test runs on margin, and so does the Box 6 figure the year-end calculation produces. Treat £400,000 of bookings as turnover and you can register a business that did not need to, or overstate your sales on every return.
- Issuing a VAT invoice for a package
- VAT invoices cannot be issued for TOMS supplies, because the VAT is not known until the year-end calculation. A business booking travel for its own staff gets an invoice saying TOMS applies instead, and that travel cannot be opted out of the scheme. Only wholesale sales to a business that resells the travel can be.
- Getting agent or principal the wrong way round
- HMRC treats you as a disclosed agent only if three things are true: you and the supplier have agreed you act as its agent, and you can show it; you routinely name the supplier, on tickets or in your booking terms; and you take no significant commercial risk on the travel. Miss one and the booking is yours, inside TOMS. If you also use TOMS, variable commission, or commission that is not readily identifiable, goes into the TOMS calculation too.
- Counting the wrong costs
- Only the direct costs of the travel go into the calculation. Card fees, brochures, advertising, inspection trips, resort reps and commission you pay to other agents are indirect and stay out. Put them in and your margin, and your VAT, come out too low. Supplier discounts reduce your costs even when they arrive later.
- Recording sales net of an agent’s commission
- If another travel agent sells your package, your selling price is the full amount the customer paid, even though the agent kept its commission and sent you the balance.
- Treating the quarterly return as the final answer
- Each quarter runs on a provisional percentage. The year-end calculation has to be done straight after your financial year ends, with the difference on the VAT return for the first period ending after it, and you cannot wait for audited accounts. Miss it and it becomes an error to correct under VAT Notice 700/45.
- Using a VAT scheme that does not work with TOMS
- You cannot use the Cash Accounting Scheme with TOMS, because of its special tax point rules, and you cannot join the Flat Rate Scheme if you are required to use TOMS.
What does a TOMS accountant actually do?
01Setting up your TOMS method
We read your supplier and customer contracts, decide which sales are Margin Scheme, in-house or agency, choose between the market value and cost-based methods, and fix your tax point and foreign currency methods. Then we write it down, so it is applied the same way every quarter.
02Quarterly provisional VAT
Each quarter we apply last year’s provisional percentage to the VAT-inclusive sales with tax points in the period, and work out the VAT for Box 1. In your first year, with no previous calculation, we set the percentage from previous trading, projected costings or your actual figures.
03The year-end TOMS calculation
Straight after your year end we total sales and direct costs, split the margin between UK and non-UK travel, work out the VAT actually due and post the difference on the right return. The same calculation sets next year’s provisional percentage.
04Error corrections
If an earlier calculation was missed or wrong, we work out the net error and correct it the way VAT Notice 700/45 allows: on your next return for net errors up to £10,000, or up to £50,000 where that is no more than 1 per cent of Box 6, and by a separate disclosure to HMRC above that. Because a TOMS Box 6 is built from margin, that 1 per cent is smaller than your bookings suggest.
05Partial exemption
Arranging travel insurance and foreign currency can be exempt, and HMRC’s own guidance says exempt income is usual in travel. VAT on overheads is reclaimed outside TOMS under the normal rules, so we run the partial exemption calculation and the de minimis test: exempt input tax of no more than £625 a month on average, and no more than half of your total input tax.
06Xero set up for TOMS
Separate accounts for UK and non-UK travel costs, for in-house supplies and for agency commission. Package sales coded so the software adds no VAT to the price and does not push gross bookings into Box 6. The provisional VAT posted each quarter, so the year-end calculation comes out of the ledger rather than a spreadsheet rebuilt every year. We work in QuickBooks, FreeAgent and Sage as well.
07Your margin watched against £90,000
Monthly, because the number that decides your registration is not the one on your bank statement, and because it moves. The threshold is £90,000 to register and £88,000 to deregister.
08The ordinary work as well
Bookkeeping, VAT returns, year-end accounts, Corporation Tax, payroll and Self Assessment, with currency, deposits, cancellations and chargebacks recorded properly along the way.
How do we get your TOMS set up?
- 01
Discovery
Understanding your business needs.
- 02
Solution Design
Crafting your custom accounting strategy.
- 03
Onboarding
Quick and easy integration.
- 04
Regular Rhythm
Consistent monitoring and reporting.
Guides for travel agencies
Plain-English explainers, kept current with the latest HMRC rules.
Travel agency and tour operator VAT questions
Mostly, yes. If you buy in travel and resell it in your own name, as a principal or an undisclosed agent, TOMS applies. There are two narrow routes out. Wholesale sales to a business that will resell the travel are within TOMS, but by concession you may opt them out. And a business that buys in no accommodation or passenger transport for resale can leave out other bought-in extras worth no more than 1 per cent of its gross turnover. If you only ever act as a disclosed agent earning a commission or a fee, TOMS does not apply to that work, and we settle which camp each part of your business falls into from your contracts.
Not automatically. VAT falls on your margin rather than the full price, and the margin on travel enjoyed outside the UK is zero-rated. But you cannot reclaim the VAT on anything you buy in to resell, which on UK hotels and transport can be a lot. It is a different basis of taxation, not a discount, so the only honest answer comes from running your own numbers.
On your margin. For registration and deregistration HMRC treats your taxable turnover as the total margin on your Margin Scheme supplies, including zero-rated ones, plus the full value of any taxable in-house supplies, taxable agency commission and other taxable sales you make in the UK. So an agency taking far more than £90,000 in bookings can sit well below the threshold. Zero-rated margin still counts towards it, so the figure you watch is the margin rather than nil. We track it monthly.
No. VAT invoices cannot be issued for TOMS supplies, because the VAT is only known after the year-end calculation. The invoice to a business customer has to say that TOMS applies instead, for example "This is a Tour Operators' Margin Scheme supply". Travel a business uses itself, such as staff trips, cannot be opted out of TOMS, so the customer cannot reclaim VAT on it.
Both, to different parts of the business. Travel sold in your own name is TOMS. Flight-only sold as a disclosed agent for the airline is commission under the normal rules, and where you are the first intermediary arranging zero-rated passenger transport, such as a scheduled flight, your commission is zero-rated too. Commission for arranging travel services for a UK tour operator is standard-rated. The split has to follow your contracts, and we keep the streams apart in the ledger so each is taxed correctly.
Straight after your financial year ends, you total the year's VAT-inclusive sales and the direct costs of the travel you bought in, split the margin between travel enjoyed in the UK and outside it in proportion to those costs, and work out the VAT on the UK share. The difference from the provisional VAT you paid during the year goes on the return for the first VAT period ending after your year end. The same calculation sets next year's provisional percentage. Our TOMS guide walks through a full worked example.
No. We do not act as an ATOL reporting accountant, so that report has to come from another firm. We can keep the books and VAT records it is prepared from.
Fixed monthly fees from £129 plus VAT, depending on the support you need, on a rolling monthly basis with no long tie-in. You get a named, qualified accountant who works with travel VAT. If you only want the year end done, that is available as a one-off instead.
Yes. We work online with clients across the UK, with a named accountant rather than a call centre, in Xero, QuickBooks, FreeAgent or Sage, whichever you already run. Nothing about the TOMS work needs us to be in the same building as you.
One accountant for your TOMS, your VAT and your year end.
Whether you sell holidays as an agent, build packages as a tour operator, run ground arrangements as a DMC or move groups by coach, the VAT rules are the same notice read from a different angle. We set TOMS up from your contracts, run it every quarter, and do the year-end calculation on time. Zmartly is CIMA-regulated and led by Harvey Dhillon, ACMA CGMA.
- TOMS explained, with worked calculations
- VAT services
- Bookkeeping
- Year-end accounts
- Hotels and restaurants
- Wedding and event planners
Zmartly Ltd, 12 Hammersmith Grove, London W6 7AP. Call 020 8175 5145. We work with travel businesses across the UK, online, in Xero, QuickBooks, FreeAgent or Sage. Fixed monthly fees from £129 plus VAT, on a rolling monthly basis with no long tie-in.
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