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This publication is available at https://www.gov.uk/government/publications/vat-notice-7096-travel-agents-and-tour-operators/vat-notice-7096-travel-agents-and-tour-operators
This notice cancels and replaces Notice 709/6 (March 2002). Details of any changes to the previous version can be found in paragraph 1.1 of this notice.
Other notices on this or related subjects
700 The VAT Guide
701/49 Finance and Securities
706 Partial exemption
709/5 Tour operators’ margin scheme
741 Place of supply of services
744A Passenger transport
1.1 What is the notice about
It explains how VAT applies to travel agents and tour operators.
The contact information for the Customs and Indirect Tax Directorate has been updated.
1.2 How must I account for VAT if I am a travel agent
If you are a travel agent, how you must account for VAT depends upon your relationship with your customer. The term “travel agent” is often used loosely and a travel agent may act in 3 ways, which will affect how you must account for VAT.
1.3 How can a travel agent act
A travel agent can be:
- an agent (that is, intermediary) – see section 2
- a travel agent acting in its own name – see section 4
- a principal – see section 5
1.4 How will I know in which of the three ways I am acting
You will have to look at the contractual and documentary evidence between yourself and your customer, see paragraphs 2.1, 4.1 and 5.1.
1.5 Does it matter if I use the term “agent” in my trading name
No. What matters is how you are acting, not what you call yourself. As a travel agent you may be acting as an intermediary for some supplies and a principal for others. You must ensure that you follow the appropriate VAT rules for each case.
1.6 If I receive “commission” from my customer, does it mean that I am an intermediary
Not necessarily – you must look at the documentary evidence, for example, contracts and how the supply is advertised to your customer, see paragraph 1.5.
2.1 How will I be acting as an intermediary
You will be acting as an intermediary if:
- both you and your principal have agreed that you will act as their intermediary (agent). You must be able to demonstrate this, normally by holding commercial documentary evidence, for example an agreement or contract
- you must routinely fully disclose the name of the principal you are acting for, for example on all tickets you issue or in your booking terms and conditions
- you are not taking any significant commercial risk in relation to the services you are arranging
You can find more information about the general treatment of intermediaries (agents) in Notice 700 The VAT Guide.
2.2 What is the value of my supplies as an intermediary
As an intermediary, the value of your supply upon which any VAT may be due will be the amount of commission due from your principal, or the fee that you charge, excluding any VAT itself. It is your responsibility to issue invoices for your supplies. However it is common practice in the travel industry for tour operators to use a self-billing system, which is explained in paragraph 2.3.
2.3 What is self-billing
This is where your principal – for example, the tour operator or travel provider – takes on responsibility for invoicing your supply to them. They can only do so with the prior permission of both you and their local VAT Business Advice Centre. Even if the tour operator or travel provider issues your sales invoice to them under a self-billing arrangement, it remains your responsibility, as the supplier of the intermediary service, to determine the correct VAT treatment.
You can find more about invoicing and self-billing in Notice 700 The VAT Guide.
2.4 How do I treat my commission for VAT purposes
In order to determine whether or not your commission is liable to VAT, you will need to consider the place of supply of your service and the VAT liability of the underlying supply.
2.5 What is the place of supply of my commission
This will depend on the nature of the supply that you are arranging. This is explained in further detail in section 3.
2.6 What if I am a sub-agent
If you are acting as a sub-agent (that is an intermediary acting for another intermediary), then your services, which are supplied in the UK, are standard-rated.
2.7 Can I reclaim input tax
If you are acting as an intermediary under the terms of paragraph 2.1 you can normally reclaim VAT, subject to the normal rules, which is chargeable and invoiced to you by your UK VAT-registered suppliers if it relates to:
- taxable (including zero-rated) supplies
- supplies made outside the UK that would have been taxable (including zero-rated) if made in the UK
- supplies of services to a person who belongs outside the EC, or the making of arrangements for such supplies, provided that the supply is an exempt
- insurance service or certain specified exempt financial service, or would have been if made in the UK
For further information about input tax, you should refer to Notice 700 The VAT Guide and Notice 706 Partial exemption.
3. Place of supply and VAT liability of intermediaries’ services
3.1 What does this section cover
This section covers the VAT liability of intermediaries’ services supplied in the UK. It does not cover supplies which are outside the UK and therefore outside the scope of UK VAT.
3.2 How do I establish the place of supply of my intermediary services
As a travel agent, in addition to travel, it is possible that you may be involved in arranging supplies of other services for your customers, for example you may arrange insurance, financial or other services such as tuition or car hire. If you act as an intermediary in arranging such services, you should refer to Notice 741 Place of supply of services in order to determine the place of supply of your services.
3.3 What if the place of supply of the service I am arranging is outside the UK
If the place of supply of your service is in another member State:
- you may be liable to register and account for VAT in that country
- if your principal is registered for VAT in a different member State from you, your principal may be responsible for accounting for the VAT under the “reverse charge” procedure. This is covered in more detail in Notice 741 Place of supply of services.
It is best to contact the relevant member State to obtain the correct information for your supplies
3.4 If the place of supply of the insurance services which I arrange is the UK, what is the VAT liability
Certain insurance-related intermediary services, including arranging for the provision of travel insurance, are exempt. Your supply of arranging travel insurance is exempt if the insurance is supplied:
- in isolation of any travel
- in relation to a supply of a travel service on which no UK VAT is payable
- in relation to the sale of a travel service which bears UK VAT, provided that you notify the traveller, in writing, the price of the insurance as due under the contract of insurance and any fee related to that insurance charged over and above the premium
You can find more information about insurance services in Notice 701/36 Insurance and Notice IPT2 A general guide to IPT.
3.5 If the place of supply of financial services which I arrange is the UK, what is the VAT liability
The issue, transfer or receipt of, or any dealing with money is an exempt supply, for example if you exchange an amount in sterling for the equivalent amount in Euros and make a commission, your supply is exempt.
You can find more information about financial services in Notice 701/49 Finance and Securities.
3.6 What is the VAT liability of my commission when it relates to passenger transport services
If you act as the initial intermediary in arranging zero-rated passenger transport, such as:
- scheduled flights
- journeys from a place within to a place outside the UK and vice versa
- most UK transport in vehicles with a carrying capacity of not less than ten people
then your services of arranging it are also zero-rated. Further information can be found in Notice 744A Passenger transport.
However see paragraph 2.6 if you are not the initial intermediary and sections 4 and 5 if you are making arrangements of designated travel services.
3.7 What is the VAT liability of my commission when it relates to designated travel services
If you are acting as an intermediary for a tour operator who is established (or has a fixed establishment) in the UK, then your services are standard-rated. If you are acting as an undisclosed intermediary or principal, see sections 4 and 5 and Notice 709/5 Tour operators’ margin scheme.
4. Intermediaries acting in their own names
4.1 How will I be acting in my own name
This is an arrangement where the ultimate provider of the goods or services, for example the travel or accommodation provider, remains undisclosed to your client. You must be able to demonstrate this, normally by holding commercial documentary evidence, for example an agreement or contract. Further information on intermediaries acting in their own names can be found in Notice 700 The VAT Guide.
4.2 How must I treat my “commission”
In these circumstances, the procedures explained in sections 2 and 3 cannot be used and you must account for VAT on your “commission” (profit margin) under the Tour operators’ margin scheme (see Notice 709/5 Tour operators’ margin scheme).
5. Travel agents acting as a principal
5.1 How will I be acting as a principal
You will be supplying travel packages (including transport or accommodation) to your customer, some of which you will have bought in from other businesses, or supplied in-house from your own resources. You must be able to demonstrate this, normally by holding commercial documentary evidence, for example an agreement or contract.
5.2 How must I account for VAT
You must account for VAT using the Tour operators’ margin scheme. For details about what that scheme covers and how it operates see Notice 709/5 Tour operators’ margin scheme.
Further help and advice
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Comments or suggestions
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Customs and Indirect Tax Directorate
VAT Principles Policy Team
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