TOMS scheme

accounts123x Registered Posts: 8 New contributor 🐸
A new client has a turnover in excess of VAT registration limit.

When I questioned why she wasnt VAT registered; her answer was "no no its ok because my costs come off my sales for VAT purposes. I am in the TOMS scheme".

I know the mechanics of the TOMS scheme.

My query is :

Can I take her word for it or do I need to make further checks. My engagment letter does not include VAT. I am not engaged to deal with VAT matters.

What further checks would others do - if any?

I am just thinking of covering myself if it transpires that this business should have been VAT registered and outputs become payable - potentially running into the £'000 based on turnover I have seen.

Any input greatly appreciated.


  • paulstafford
    paulstafford Registered Posts: 126 Dedicated contributor 🦉
    I used to be the financial controller for a small Tour Operator and we prepared our VAT Return under the TOMs scheme.

    If your clients turnover is greater than the current VAT threshold then she needs to register her business for VAT.

    From what you say in your post, I believe she is under the impression that providing the aggregate of the profit margins on the holiday she sells in the year ( effectively the annual Gross Profit ) is below the turnover threshold she does not need to register. I've had a quick look at the TOMS notes on the HMRC website and I cannot see anything to suggest this is the case.

    If I was in your position I would write to her explaining she is incorrect and advise she comes clean to HMRC - at least that will mitigtate the potential penalties. Fingers crossed she sees sense.
  • accounts123x
    accounts123x Registered Posts: 8 New contributor 🐸
    thanks for the reply.

    But isnt that the what toms is?

    Accouting for VAT on the margin of the holiday sold i.e the GP.

    Or does the registration threshold applied as normal i.e 70k this yr - but the output due will be on the margin(gp%) only.

    Thanks again for your help - I am a litle confused with this one.
  • Anne Boleyn
    Anne Boleyn Registered Posts: 196 Dedicated contributor 🦉

    Hi Accounts123X

    Here are some links which should help work it out. The first link, section 4 deals with when your client should register etc.

    I'm sure there are others but hopefully these should help.
  • paulstafford
    paulstafford Registered Posts: 126 Dedicated contributor 🦉
    Looking at the Links provided by Anne it is the margin which you have to use to consider whether to register, assuming all the sales are actually covered by the TOMS.

    So my first post is not correct.

  • payrollpro
    payrollpro Registered Posts: 427 Dedicated contributor 🦉

    You are right in your second post, in complete contrast to the standard method of valuing turnover the TOM scheme T/o is the margin that is subject to VAT and not the total price charged.

    The danger is that if this client registers it will be treated as a voluntary registration and if subsequently proves to be premature they will not get that VAT back. Registering too early, unless they have very good reasons for it other than to do with TOMS, can be a big mistake.

    It looks to me as if the client in this case is absolutely right.

  • accounts123x
    accounts123x Registered Posts: 8 New contributor 🐸
    thank you...

    thank you for all your input - having looked around I am now satisifed client is right and t/o for TOMS purposes is in fact GP.

    Thank you again.
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