Event industry association Eventia is hailing a 'significant breakthrough' following negotiations with HMRC on changes to the rules governing VAT accounting for events, which it argues will benefit agencies competing in the European market.

The agreement centres on the operation of Tour Operators' Margin (TOMS), a scheme for businesses that buy-in and re-sell travel, accommodation and certain other services. Up until now, agencies managing events involving booking travel and accommodation were unable to reclaim VAT paid on the non-travel elements.

Eventia said this created an unfairness and anomaly compared with VAT accounting in other parts of the EU, putting UK agencies at a competitive disadvantage. Following 18 months of negotiations with HMRC, it will now be possible for agencies to issue VAT invoices on the 'non TOMS' element (known as 'in-house supplies') of an event.

Eventia regulation committee chairman Brian Kirsch said: 'We are delighted to have reached this milestone agreement with HMRC. It sounds dull and technical, but this change will be of immediate benefit to agencies wanting to compete in the European market, and who want to account for VAT correctly.'

The Eventia regulation committee is continuing to work with HMRC on other TOMS issues, including whether minor 'TOMS elements' in an event can be disregarded, and more fundamentally whether B2B transactions should be in TOMS at all. The industry body said there may be further developments later this week as the European Court of Justice judgment on TOMS is expected by 27 September.

David Bennett, travel VAT partner at Saffery Champness said: 'This agreement will help agencies and their clients considerably. The old approach created very real but unfair VAT costs. The ability toinvoice with VAT will help to ensure that VAT costs are kept to a minimum. We are still working with HMRC on other aspects of agencies' VAT accounting and hope to have more news to share soon.'