Build your Tour Operators' Margin Scheme (TOMS) records from booking selling prices by tax point, then match the direct costs to those sales. Your bank receipts alone cannot establish the figures for this VAT calculation.
Your bank feed tells you when money moved. Your booking records explain what you sold, when travellers departed and what suppliers charged. The bank is a useful witness, but it has not read the itinerary.
This is the practical bookkeeping layer beneath our full guide to the Tour Operators' Margin Scheme. The aim is a set of figures you can trace back to individual bookings.
Why are TOMS sales different from bank receipts?
The annual calculation starts with selling prices for supplies with tax points during your financial year. A tax point is the date a supply becomes taxable. Selling prices include VAT where applicable (709/5 para 6.1).
Under method 1, use departure or the first occupation of accommodation, whichever happens first. Under method 2, a qualifying payment can create an earlier tax point. Receipt by a travel agent on your behalf also counts when considering payment dates (709/5 para 4.13).
Under method 2, payments exceeding 20 per cent of the selling price trigger tax points. Payments not already accounted for must also be checked together against that threshold. Outstanding amounts become taxable at departure or first occupation of accommodation, whichever comes first (709/5 para 4.14). See when a deposit creates a TOMS tax point for the timing detail.
Your receipts can also contain money collected as a disclosed agent. Where your commission is readily identifiable, those agency amounts stay outside the calculation. Conversely, if another agent sells your package and deducts commission, your selling price includes the full customer payment (709/5 para 6.1).
Refunds for unsatisfactory service and discounts you agree with customers reduce the selling price (709/5 para 6.1). Keep a booking reference against each adjustment.
What does a bank-to-bookings reconciliation look like?
Illustrative example, not a real business.
Nadia's agency uses method 2 and receives £310,000 into its bank during the quarter. The booking register identifies receipts without a tax point yet, airline agency collections and unpaid balances.
| Reconciliation item | Amount |
|---|---|
| Money received in the bank during the quarter | £310,000 |
| Less deposits still below 20 per cent of their holidays' prices, with no tax point yet | £24,000 |
| Less money collected as the airlines' disclosed agent, with readily identifiable commission | £31,000 |
| Add balances unpaid when travellers departed, with tax points at departure | £7,000 |
| Selling prices with tax points in the quarter | £262,000 |
The deposit and unpaid-balance adjustments follow method 2's timing rules. Nadia's travellers have departed, so those unpaid balances cannot wait for the bank receipt (709/5 para 4.14).
The airline agency collections are excluded because the commission is readily identifiable (709/5 para 6.1).
Nadia applies the provisional percentage to £262,000. Using £310,000 would start the calculation from the wrong total. The percentage establishes the provisional taxable amount, to which the VAT fraction is then applied (section 10, steps 3 to 5).
Which costs belong against those bookings?
For bought-in travel, total the purchase prices including VAT. Include only purchases relating to the sales in step 1 for that financial year. Paying a supplier during the year does not, by itself, establish that the purchase belongs in that year's calculation (709/5 para 6.3).
Supplier discounts and price reductions reduce those costs, even when received later. Air Passenger Duty (APD) payable goes into the cost (709/5 para 6.3). Keep supplier credits linked to the original booking or group of bookings so that reductions remain visible.
Indirect costs stay outside the calculation. These include brochures, advertising, inspection trips, office costs, accountancy and airport or resort representatives. Bank fees, card transaction fees, foreign exchange charges and commission paid to agents also stay out (709/5 para 6.4). They still reduce your profit, but none of them goes into the TOMS calculation.
For bookkeeping, give direct travel costs and overheads separate categories. Retain the invoice reference alongside each booking allocation. Where one supplier invoice covers several bookings, document how you divided it.
A supplier payment may settle several invoices together, so keep that payment link alongside the individual costs.
What should your TOMS booking register contain?
HMRC requires total selling prices and separate direct-cost records by type and VAT treatment. Keep bought-in travel, in-house supplies and relevant agency supplies distinguishable. For in-house elements valued at market value, retain the value and evidence explaining its calculation (709/5 para 5.6).
We suggest a booking register containing these fields:
- Booking reference and the customer's agreed selling price.
- Departure date and the date of the first night of accommodation.
- Each payment date and amount, including receipts through agents, so tax points can be dated.
- Where the trip is enjoyed: the United Kingdom (UK), outside the UK, or both.
- Each supplier cost, invoice reference, currency, conversion rate and sterling amount.
- Supplier discounts, customer discounts and refunds, linked to the booking.
- Any in-house element, separately identified.
- Any agency element and whether its commission is readily identifiable.
Keep payment history available rather than replacing it with a single "paid" status. Likewise, preserve the original selling price and subsequent changes separately.
Which foreign currency rate should you record?
Foreign currency supplier costs must be converted into sterling using one of five permitted methods. Keep documentary evidence relating to currency purchases showing the rate used (709/5 para 6.6).
The five permitted methods are listed below. The first two also require publication of the rate in any brochure or leaflet offering those supplies (section 13, TL2).
- The Financial Times rate using the Federation of Tour Operators' base rate current when your supplier costed the supplies.
- The commercial rate current when you costed the supplies in your brochure.
- The Financial Times rate on the date you pay for the supplies.
- The rate applicable when you purchased the foreign currency used to pay for those supplies.
- The HMRC customs period rate in force when you pay for the supplies.
A change of method is only allowed at the start of your next financial year. The deadline is the due date of that year's first VAT return, and permission is not retrospective (709/5 para 6.6).
Whether the register lives in Xero or a spreadsheet, note the rate source beside the calculation.
What should you do this quarter?
We build TOMS figures from the booking system export, grouped by tax point. We then reconcile those figures to the ledger and bank, rather than starting from receipts in the accounting software.
Use this short checklist before preparing the quarter's figures:
- Export booking prices, travel dates and complete payment histories.
- Review tax point dates using your existing method.
- Identify agency collections, agent deductions, refunds and agreed discounts.
- Link direct costs and supplier credits to the relevant bookings.
- Check currency methods and retain the supporting evidence.
- Reconcile the booking totals to your ledger and bank, explaining each difference.
If you need help connecting booking data with your accounts, our accountants for travel agencies and tour operators can work through the records with you.
Frequently asked questions
Can I use my bank receipts as my TOMS sales?
Bank receipts alone do not establish your Tour Operators' Margin Scheme sales. Your annual calculation starts with selling prices for supplies whose tax points fall within your financial year. Receipts can include money collected as an agent or exclude commission another agent deducted. Build your sales total from booking records, then explain the differences from bank receipts.
What records does HMRC expect for TOMS?
HMRC requires records of total selling prices and separate direct costs by supply type and tax treatment. This includes distinguishing bought-in travel, in-house elements and relevant agency supplies. Where you use market values for in-house supplies, keep those values and evidence explaining their calculation.
Do refunds come off my TOMS sales?
Refunds for unsatisfactory service and agreed customer discounts reduce the selling price used in your Tour Operators' Margin Scheme calculation. Record each against its booking, with the reason and supporting correspondence.
Which exchange rate do I use for supplier invoices in euros?
Convert euro invoices using one of the five permitted methods in the Tour Operators' Margin Scheme rules. These cover specified costing rates, a Financial Times payment-date rate and the rate for currency you purchased. The customs period rate at payment is also permitted. The first two require brochure disclosure. Your accounting software's default rate needs checking against your chosen method.
Sources
Every rule in this article was checked against these pages on 22 October 2026.
