Following discussions with ABTA, HMRC has confirmed that once the transition period ceases on January 1st, the VAT charged on holidays through the Tour Operator Margin Scheme (TOMS) on travel outside of the UK will be zero rated.

This will remove an area of uncertainty on a crucial issue for many ABTA members and has been agreed by HMRC on the assumption of a possible no deal with the EU on TOMS.

In the event of a no deal being reached with the EU on TOMS, a new UK version will be introduced which will require payment of TOMS VAT only on UK holidays but not on package holidays within the EU.

A guidance note for ABTA Members has been agreed with HMRC, which provides further information and details in respect of transitional issues.

The information is available to ABTA members here.

One area of uncertainty remains, that in the longer term there might be a requirement to register for VAT with individual EU states.

The note will be updated as and when there is more clarity in this area and members will be informed through ABTA Today and the trade press if there any other further developments.

Carolyn Watson, ABTA director of finance and operations, said: “The confirmation by HMRC that post Brexit packages within the EU will be zero rated for TOMS is great news for many of our members.

“We were pleased to be able to work closely with HMRC on this important matter and I thank HMRC for its understanding of how serious this issue is for many travel companies and its action to remove this area of uncertainty.

“This will greatly assist Members as they look to rebuild travel with our most important holiday destinations, the majority of which are within the EU.”

She added: “However, I would stress that one area of uncertainty still remains; in the longer term the possible need to register for VAT purposes within individual EU state.

“We will let members know when the position on this becomes clearer.”