Chartered accountants Clement Keys is warning businesses and schools that are involved in regular overseas travel and trips booked via tour operators that costs will rise when HMRC changes the way it levies VAT on those tour operators from January 2010.

Businesses and schools who were previously able to recover VAT incurred, will no longer be able to do so as the tour operator will not be able to opt out  of the Tour Operators Margin Scheme, which allowed them to choose how they wanted to deal with the VAT element. They will from 1st January have to include VAT in the total and not itemise it separately. 

Non compliance could result in fines of up to 70% says Clement Keys director of VAT services Steven Simmonds.

"This is yet another piece of unnecessary red tape from the EC that will make systems more complicated for the tour operators and increase costs for those that buy from them. Whilst it will not impact on everyone, those businesses and schools affected cannot afford to absorb yet more increases in costs when budgets and profitability are under so much pressure during this severe economic downturn."