What is TOMS in the rent-to-holiday-let market?

The Tour Operators Margin Scheme (TOMS) is a specialised VAT scheme designed to simplify the tax process for businesses in the travel and tourism sector.

While it’s commonly associated with traditional tour operators, the scheme’s flexibility means it can also be applied in less conventional settings, such as the “rent-to-holiday-let” market.

If you are a landlord or you’re sub-letting a property in the holiday-let market, TOMS could provide some much-needed VAT benefits for your business.

How TOMS works

Before looking at its application for your business, it’s crucial to understand how TOMS works.

The scheme allows businesses to account for VAT on the margin between the cost of purchasing and reselling travel-related services.

This eliminates the need to register for VAT in each EU Member State where the services are consumed.

TOMS typically covers a range of services including accommodation, passenger transport, and even the use of special airport lounges.

Applicability in the rent-to-holiday-let sector

The “rent-to-holiday-let” market involves renting a property and then sub-letting it as a holiday accommodation.

This business model can benefit from TOMS in several ways:

• Simplified VAT process: Managing VAT can be complex, especially when dealing with properties in different jurisdictions. TOMS can simplify this by allowing VAT to be accounted for only on the profit margin.
• Inclusive services: Often, holiday lets offer additional services like airport pickups or guided tours. These can also be included under TOMS, further streamlining the VAT process.
• Package deals: If you’re offering a package that includes not just the accommodation but also other services like transport or excursions, TOMS can be particularly beneficial. It allows you to account for VAT on the entire package rather than each individual component.

Financial benefits

Utilising TOMS can result in financial advantages for your holiday-let business:

• Cost-efficiency: By accounting for VAT only on the margin, you could potentially lower your overall tax liability.
• Cash flow: The scheme can improve cash flow by deferring the point at which VAT needs to be accounted for, giving you more working capital in the interim.
• Competitive pricing: The cost savings can be passed on to customers, making your holiday lets more competitively priced.

While TOMS is not often the first thing that comes to mind in the “rent-to-holiday-let” sector, its benefits are hard to ignore.

From simplifying VAT obligations to offering financial benefits, TOMS can be a valuable tool for individuals and businesses venturing into holiday lets.

As always, it’s advisable to consult an accountant to ensure that TOMS is the right fit for your specific business needs – especially considering the complex nature of the TOMS scheme.

Our accountants are ready to answer your questions on TOMS and any other financial queries you might have. Please get in touch if you require more information.