The Value Added Tax (Tour Operators) (Amendment) Order 2009

EXPLANATORY NOTE

(This note is not part of the Order)

This Order, which comes into force on 1st January 2010, removes an inconsistency between the Value Added Tax (Tour Operators) Order 1987 (S.I. 1987/1806) (“the 1987 Order”) and Council Directive 2006/112/EC.

The 1987 Order gives effect to the requirement under Article 26 of Council Directive 77/388/EEC (OJ No. L145, 13.6.77, p.1) (now Articles 306-310 of Council Directive 2006/112/EC (OJ No. L347, 11.12.06, p. 1)) to provide a scheme (“The Tour Operators’ Margin Scheme”) under which tour operators account for VAT on the difference between the VAT-inclusive purchase price and the selling price of their services (“the margin”). The operator only accounts for VAT on the margin but cannot recover input tax on purchases.

Article 3(3) of the 1987 Order enables tour operators to exclude travel services supplied to businesses for their own consumption in the United Kingdom from the Tour Operators’ Margin Scheme (“the opt out”) and enables those businesses to recover input tax in full in relation to those supplies. This Order withdraws this opt out by omitting article 3(3) of the 1987 Order and consequently these supplies will from 1st January 2010 be subject to the Tour Operators’ Margin Scheme.

The remainder of this Order introduces a new article 9A into the 1987 Order to cover situations where goods and services have been supplied to a tour operator before 1st January 2010 and input tax credit is claimed but the goods and services are supplied as part of a designated travel service on or after 1st January 2010.

A full Impact Assessment of the effect that this instrument will have on the costs of business and the voluntary sector is available on the HMRC website at http://www.hmrc.gov.uk/better-regulation/ia.htm.