Long story short, many rent to rent operators are using TOMS but HMRC have yet to find a consistent approach. There may be a test case.
Notice 709/5 para 7.6 describes scenarios in which HMRC will see accommodation as inhouse or, put more simply, falling under normal VAT rules. The facts you describe do not immediately appear to fall within para 7.6.
Why should the rent to rent company be treated as if they owned the property? How do they differ from all the villa specialists who have paid TOMS for years?
I am no fan of offshoring and any such move would need to be convincing.
Back to the present structure, the facts given are not sufficient to determine whether
- you make inhouse supplies (in which case, as far as those services go, it is normal place of supply rules - 709/5 para 4.9 - so offshoring of limited help) or
- you sell B2B (in which case TOMS may not apply - 709/5 para 3.1 - but see Kingdom of Spain decision in ECJ and HMRC Brief 05/14).
Presumably you are aware that for registration purposes it is the margin that counts not the gross sales (709/5 para 4.1) so you may be further from having to register than you realise.
You are correct to worry about tax in the UAE or wherever you go (a case of the frying pan and the fire?) and to suspect that if your business is not established in the UK the registration limit is nil.
See my TOMS notes at www.pooley.co.uk
For TOMS supplies it is the margin which goes in box 6. Notice 709/5 para 4.1 refers and EU law says the taxable amount is the margin: Art 308 PVD.
But it gets a bit more complicated. How do you get the ZR non EU margin (from Brexit, non UK margin) if HMRC provl % only recognises the SR margin? And what about inhouse supplies (normal rules for box 6).
There is a second provl % in my spreadsheet available from pooley.co.uk which deals with all this. But ultimately nobody really cares about box 6 and that includes HMRC or they would have dealt with this in Notice 709/5. Relax.
Hi
Some rent to rent is TOMS some is not. HMRC are arguing and we have test cases.
Either way sales commissions paid are not allowable as a cost of sale in TOMS. They are overheads so you get to reclaim input tax if (i) you are registered (ii) the supplier charges VAT and (iii) you get a VAT invoice.
See also general points on my website pooley.co.uk
Best wishes
Margin
Hi
Some rent to rent is TOMS some is not. HMRC are arguing and we have test cases.
Either way sales commissions paid are not allowable as a cost of sale in TOMS. They are overheads so you get to reclaim input tax if (i) you are registered (ii) the supplier charges VAT and (iii) you get a VAT invoice.
See also general points on my website pooley.co.uk
Best wishes
Margin
Per HMRC Notice 709/5 para 2.9 such tickets sold in isolation do not fall under TOMS (being secondary travel supplies only in para 2.10)
So normal place of supply rules apply see Arts 53 & 54 Dir 2006/112, depending whether sold B2B or B2c, but either way place of supply normally in destination
In which case the supply is outside the scope of UK VAT ie no VAT is chargeable
And luckily the Rugby World Cup in Japan coincides with the ABTA conference
See my website for notes on TOMS www.pooley.co.uk
Margin Pooley
Sounds like TOMS to me
But always depends on the actual facts so best to check
See my notes on TOMS on my website www.pooley.co.uk
Remember TOMS is not always helpful eg if your clients want VAT invoices
Martin Pooley
See the Supreme Court decision in Med Hotels in 2014
Martin Pooley
Briefly:
Agent- not TOMS
Principal - TOMS on margin on EU destinations
- No VAT on margin on non EU destinations
You need to decide whether your client is acting as an agent - in which case it is normal VAT on the commission received. Difficult to achieve so probably not. See hotel bill back scheme HMRC Brief 21/10.
Or as a principal ie they are buying in and reselling hotel accommodation etc to eg Groupia. In the latter case they are making wholesale supplies which prima facie do NOT fall under TOMS: Notice 709/5 para 3.2. But the ECJ decided wholesale sales fall under TOMS though HMRC have not implemented the decision so your client can choose whether or not to use TOMS. HMRC Brief 05/14.
I do wonder why eg Groupia do not go direct to the hotels etc so the question seems a bit strange.
Bear in mind that TOMS would prevent your client issuing a VAT invoice to their client. Your client's client may have a view about whether or not they want a VAT invoice but if your client's client is using TOMS they cannot reclaim input tax so they would not normally mind. So it may not matter whether it is TOMS or normal VAT.
If your client's client wants to reclaim VAT it would be important to avoid TOMS. See first paragraph above.
Under TOMS your client works out the VAT at the end of year and pays it to HMRC. Their client pays it in the price and cannot reclaim it. So best to model it into the price quoted to clients. There is in general no right to add VAT to the price quoted unless it is agreed. Your client quotes a price and their client pays it and your client sorts out the VAT. Think visit to the pub: lunch £9.95: do you expect to pay VAT on top? No.
TOMS applies to supplies of accommodation, transport etc.
If you only sell tickets it does not apply.
See flowchart on my website. www.pooley.co.uk
Margin Pooley
My answers
Long story short, many rent to rent operators are using TOMS but HMRC have yet to find a consistent approach. There may be a test case.
Notice 709/5 para 7.6 describes scenarios in which HMRC will see accommodation as inhouse or, put more simply, falling under normal VAT rules. The facts you describe do not immediately appear to fall within para 7.6.
Why should the rent to rent company be treated as if they owned the property? How do they differ from all the villa specialists who have paid TOMS for years?
Martin Pooley
I am no fan of offshoring and any such move would need to be convincing.
Back to the present structure, the facts given are not sufficient to determine whether
- you make inhouse supplies (in which case, as far as those services go, it is normal place of supply rules - 709/5 para 4.9 - so offshoring of limited help) or
- you sell B2B (in which case TOMS may not apply - 709/5 para 3.1 - but see Kingdom of Spain decision in ECJ and HMRC Brief 05/14).
Presumably you are aware that for registration purposes it is the margin that counts not the gross sales (709/5 para 4.1) so you may be further from having to register than you realise.
You are correct to worry about tax in the UAE or wherever you go (a case of the frying pan and the fire?) and to suspect that if your business is not established in the UK the registration limit is nil.
See my TOMS notes at www.pooley.co.uk
For TOMS supplies it is the margin which goes in box 6. Notice 709/5 para 4.1 refers and EU law says the taxable amount is the margin: Art 308 PVD.
But it gets a bit more complicated. How do you get the ZR non EU margin (from Brexit, non UK margin) if HMRC provl % only recognises the SR margin? And what about inhouse supplies (normal rules for box 6).
There is a second provl % in my spreadsheet available from pooley.co.uk which deals with all this. But ultimately nobody really cares about box 6 and that includes HMRC or they would have dealt with this in Notice 709/5. Relax.
Hi
Some rent to rent is TOMS some is not. HMRC are arguing and we have test cases.
Either way sales commissions paid are not allowable as a cost of sale in TOMS. They are overheads so you get to reclaim input tax if (i) you are registered (ii) the supplier charges VAT and (iii) you get a VAT invoice.
See also general points on my website pooley.co.uk
Best wishes
Margin
Hi
Some rent to rent is TOMS some is not. HMRC are arguing and we have test cases.
Either way sales commissions paid are not allowable as a cost of sale in TOMS. They are overheads so you get to reclaim input tax if (i) you are registered (ii) the supplier charges VAT and (iii) you get a VAT invoice.
See also general points on my website pooley.co.uk
Best wishes
Margin
Per HMRC Notice 709/5 para 2.9 such tickets sold in isolation do not fall under TOMS (being secondary travel supplies only in para 2.10)
So normal place of supply rules apply see Arts 53 & 54 Dir 2006/112, depending whether sold B2B or B2c, but either way place of supply normally in destination
In which case the supply is outside the scope of UK VAT ie no VAT is chargeable
And luckily the Rugby World Cup in Japan coincides with the ABTA conference
See my website for notes on TOMS www.pooley.co.uk
Margin Pooley
Sounds like TOMS to me
But always depends on the actual facts so best to check
See my notes on TOMS on my website www.pooley.co.uk
Remember TOMS is not always helpful eg if your clients want VAT invoices
Martin Pooley
See the Supreme Court decision in Med Hotels in 2014
Martin Pooley
Briefly:
Agent- not TOMS
Principal - TOMS on margin on EU destinations
- No VAT on margin on non EU destinations
You need to decide whether your client is acting as an agent - in which case it is normal VAT on the commission received. Difficult to achieve so probably not. See hotel bill back scheme HMRC Brief 21/10.
Or as a principal ie they are buying in and reselling hotel accommodation etc to eg Groupia. In the latter case they are making wholesale supplies which prima facie do NOT fall under TOMS: Notice 709/5 para 3.2. But the ECJ decided wholesale sales fall under TOMS though HMRC have not implemented the decision so your client can choose whether or not to use TOMS. HMRC Brief 05/14.
I do wonder why eg Groupia do not go direct to the hotels etc so the question seems a bit strange.
Bear in mind that TOMS would prevent your client issuing a VAT invoice to their client. Your client's client may have a view about whether or not they want a VAT invoice but if your client's client is using TOMS they cannot reclaim input tax so they would not normally mind. So it may not matter whether it is TOMS or normal VAT.
If your client's client wants to reclaim VAT it would be important to avoid TOMS. See first paragraph above.
Under TOMS your client works out the VAT at the end of year and pays it to HMRC. Their client pays it in the price and cannot reclaim it. So best to model it into the price quoted to clients. There is in general no right to add VAT to the price quoted unless it is agreed. Your client quotes a price and their client pays it and your client sorts out the VAT. Think visit to the pub: lunch £9.95: do you expect to pay VAT on top? No.
Martin Pooley
TOMS applies to supplies of accommodation, transport etc.
If you only sell tickets it does not apply.
See flowchart on my website.
www.pooley.co.uk
Margin Pooley