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HMRC internal manual

VAT Partial Exemption Guidance

Guidance for specific trade sectors: the travel industry: standard method/special method for tour operators and travel agents

Standard method/special method for tour operators

Supplies which come under the… Use for VAT purposes the…
* TOMS * margin value of the travel package
* normal VAT rules (in-house supplies or other supplies made as a principal) * full value for VAT purposes
* supplies made as an intermediary * commission value

It can be seen that unless the tour operator only makes in-house supplies, the standard partial exemption method, or a special method based on simple output values, is unlikely to be suitable because the business will be mixing outputs valued at the full value with those valued at either the margin or commission value. The standard method would be unfair and unreasonable because it would be weighted towards the supplies made under the normal VAT rules.

Standard method/special method for travel agents

Where the travel agent is acting as an intermediary, the value of the supplies will be its commission. If it makes other supplies as a principal then the standard method will not be appropriate for the same reasons as given above.

The standard method may not be appropriate even if the travel agent is only acting as an intermediary because the commission could be calculated on different bases - for example either a flat rate, or a percentage of, the underlying supply.