TOMS applies to any business that buys in travel, accommodation and certain other services and resells them as a principal or undisclosed agent, acting in its own name, for the direct benefit of travellers. That includes travel agents acting as principal, for example when dynamically packaging or reselling net rates, whatever they call themselves.

How it works

VAT is worked out on the margin, which is what the customer pays less what the business pays its suppliers, and VAT on the bought-in travel cannot be reclaimed. The margin is standard-rated when the travel is enjoyed in the UK and zero-rated when it is enjoyed outside the UK. For example, a £1,200 package to Spain that cost £1,000 in bought-in flights and hotel has a £200 margin, which is zero-rated because the travel is enjoyed outside the UK. Anything the business provides itself, such as its own coaches, is separated out within the TOMS calculation and taxed under the normal VAT rules, not on the margin.

Watch out for

• Disclosed agents earning readily identifiable commission are outside TOMS and account for VAT on their commission in the normal way.

• Sales to business customers fall within TOMS and do not come with VAT invoices, although wholesale sales to other businesses for resale can be opted out.

• Since 2 January 2026, taxi and private hire journeys are outside TOMS unless the same business supplies them together with, and as an ancillary part of, accommodation or travel by bus, coach, train, ship or aircraft.

• Since 1 January 2021 the UK has run its own version of TOMS. HMRC says it mostly follows the EU principles but the details differ, so work from HMRC guidance rather than EU material.

• The margin here is a VAT calculation, not your commercial profit margin.

If you are unsure whether TOMS applies to you, HMRC suggests contacting its VAT helpline.