Munster’s first independent VAT consultancy practice providing specialist VAT and Indirect tax advisory, assurance and interim management support services to owner managed businesses, small & medium enterprises, accountants and legal practices.

TAMS Revisited:Are we there yet? – minimising the VAT cost to maximise your profit

Tuesday, April 5, 2011

by Nick Ryan

In an earlier article we looked at the introduction of TAMS and its radical impact on a wide range of businesses involved in the tourist industry. This article in itself highlighted that a number of businesses had either identified that TAMS affected them but had failed to understand that there were specific VAT reporting and accounting requirements to adhere to or, had not realised that TAMS applied to their business. What has become apparent are two issues. Firstly that those businesses identified represent a tip of the TAMS iceberg and secondary, the VAT reporting requirements and management of VAT within this industry are not focused on their key drivers, cost reduction, increased efficiency in management and enhancing their bottom line profit.
One question I have been asked by many businesses impacted by TAMS are whether there are any accounting tools or packages available that can be used to manage the VAT reporting and accounting requirements. Sadly this is a negative and this is largely due to the difficulty in designing such a specific toolkit when TAMS operators generally provide a multi faceted range of services and activities together with the diversity of business types impacted by TAMS.
In assisting clients to date impacted by TAMS we have developed “basic” spreadsheets that are tailored to cover the activities undertaken and thereby assist in the management and reporting of VAT. This is the result in the need identified to deal with the management of the range of services covering firstly both bought in and in house, the potential situation whereby the business is operating TAMS under a range of guises and, finally where the business has non TAMS activities.
In these cases businesses can easily mismanage what is a complex and potentially nightmarish demand on their VAT management function and reporting obligations.
For reference, TAMS not only covers tour operators and travels agents, and care should be taken to determine their status i.e. agent, principal or intermediary , but also organisers of sporting events and conferences, hoteliers and training service providers also qualify for some of their services/supplies. The scheme also impacts on intermediaries as, although an intermediary is not covered by the scheme, rules governing the VAT treatment of their supplies have changed to bring them in line with the introduction of TAMS.

In essence the scheme is designed to enable travel agents and alike to account for VAT on all the travel services they supply in the Member State in which they are established. This is largely an administrative step to avoid the need for travel agents to register in other Member States where they supply travel services.
A key issue for TAMS impacted businesses, and this is also the case for all businesses, is managing the VAT cost to the business in order to maximise the bottom line profit.
With the first year now over and the tourist season just commencing now is the time for these businesses to undertake a dose of navel gazing to determine whether their VAT management systems provide them with the best opportunity to manage their costs, increase efficiencies and, above all, enhance their bottom line profit.
For more information on what can be done or for assistance in assessing a busnesses VAT position contact the VAT Practice.