How VAT affects travel agents and tour operators.
This notice cancels and replaces Notice 709/6 (March 2002).
1.1 Information in this notice
This notice explains how VAT applies to travel agents and tour operators.
This notice has been put into a new format and the title, summary and subheadings have been changed to meet GOV.UK standards.
1.2 How to account for VAT if you are 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 Work out how you are acting
1.5 Effect of your trading name when you decide how you are acting
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 Work out your status if you receive commission from your customer
You are not necessarily an intermediary if you receive commission from a customer - you must look at the documentary evidence, for example, contracts and how the supply is advertised to your customer.
2.1 When you are 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 VAT guide (VAT Notice 700).
2.2 Work out the value of 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.
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 VAT guide (VAT Notice 700).
2.4 Work out if your commission is liable to VAT
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 Place of supply for your 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 Acting as 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 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 UK or European Commission, 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
3. Place of supply and VAT liability of intermediaries’ services
3.1 Information in this section
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 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 Place of supply of services (VAT Notice 741A) in order to determine the place of supply of your services.
3.3 Work out the place of supply when the service is outside the UK
If the place of supply of your service is in an EU member state:
- you may be liable to register and account for VAT in that country
- if your principal is registered for VAT in an EU member state, your principal may be responsible for accounting for the VAT under the ‘reverse charge’ procedure, this is covered in more detail in Place of supply of services (VAT Notice 741A)
It is best to contact the relevant EU member state to obtain the correct information for your supplies.
3.4 Work out the place of supply and VAT liability of insurance services arranged in the UK
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
- relation to a supply of a travel service on which no UK VAT is payable
- 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
3.5 If the place of supply of financial services which you 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 euro and make a commission, your supply is exempt.
You can find more information about financial services in Notice 701/49: finance.
3.6 VAT liability on commission for passenger transport services
If you act as the initial intermediary in arranging zero-rated passenger transport then your services of arranging it are also zero-rated. Zero-rated passenger transport includes:
- 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 10 people
Further information can be found in The VAT treatment of passenger transport (VAT Notice 744A).
3.7 VAT liability of commission for 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 Tour Operators Margin Scheme (VAT Notice 709/5).
4. Intermediaries acting in their own names
4.1 When you are acting in your 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 VAT guide (VAT Notice 700).
4.2 How to treat your commission
5. Travel agents acting as a principal
5.1 When you will 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 to 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 Tour Operators Margin Scheme (VAT Notice 709/5).
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