Europe is poised to miss its best opportunity in
years to permanently remove corporate events from the Tour Operators' Margin
Scheme, which has significantly increased cost and bureaucracy for meetings companies
and their clients, a leading travel taxation lawyer told BTN on Wednesday.
The European Commission this year started reviewing
TOMS under the aegis of the then Spanish presidency of the European Union,
which drafted new TOMS regulations that created an opt-out for business-to-business
transactions. However, the Belgian presidency, which took over from Spain on
July 1, removed the exemption for B-to-B transactions in its re-draft of the
new regulations.
Although TOMS is highly complex and superficially
irrelevant to the corporate sector, it can lead to unwary meetings clients
being unable to reclaim value-added tax on many costs. Originally conceived as
a program to exempt tour operators from charging VAT on package holidays, TOMS
applies equally to any intermediary that sells two or more travel elements in a
package, as is often the case for corporate meetings.
"It also means that intermediaries caught up
in TOMS are unable to recover VAT on their costs and must pass them on to the
client in a way that the client cannot recover VAT either," said David
Bennett, travel VAT partner with law firm Saffery Champness, which is representing
the United Kingdom-based travel industry on the matter in Brussels. "For
example, if accommodation in the U.K. is booked through an intermediary within
TOMS, the 17.5 percent VAT cannot be recovered.”
U.K.-based B-to-B intermediaries benefitted from an
opt-out to TOMS for many years, but this ended at the beginning of 2010, leading them to join other
European event organizers in finding workarounds. In essence, the workarounds
involve a hotel invoicing the intermediary care of the client, but Bennett said
the measures have proved only partially successful. "It has been a problem
because many companies don't appreciate the challenges involved, many have not
done it right and it has been a problem getting hotels to agree to it," he
said.
The current TOMS review raised the opportunity to
remove businesses from this difficult issue once and for all, but that prospect
now is in jeopardy. Last week, the Association of British Travel Agents,
supported by the Guild of Travel Management Companies and other groups,
submitted a report to the European Commission written by Bennett, outlining its
dissatisfaction with the Belgian re-draft.
"We are looking for an agreement that all
forms of B-to-B transaction should be excluded, or at least not compulsorily
included," said Bennett. "The Belgians have chosen to drop the idea
of an opt-out, saying that all companies should be in TOMS and no one should
have an opt-out. It is a fundamental right inherent in VAT directives that a
business is entitled to recover its VAT and should not be affected by how it
buys the service. This could be the last opportunity for a long time to make
the scheme work in a manner that is consistent and uniform."
Even if a B-to-B opt-out can be reinstated, all 27
members of the European Union will have to approve the new draft because it is
a fiscal matter. However, Saffery said there is an option of legal action if no
opt-out is forthcoming.