|HMRC Reference:Notice 709/6 (March 2002)||View Change History|
This notice cancels and replaces Notice 709/6 (May 1997). Details of any changes to the previous version can be found in paragraph 1.1 of this notice.
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It explains how VAT applies to travel agents and tour operators.
It has been restructured and rewritten to improve readability, but the technical content has not changed from the May 1997 edition.
This notice and others mentioned are available both on paper and on our Internet website at www.hmce.gov.uk.
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.
A travel agent can be:
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.
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.
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.
You will be acting as an intermediary if:
You can find more information about the general treatment of intermediaries (agents) in Notice 700 The VAT Guide.
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 Notice 700 The VAT Guide.
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.
This will depend on the nature of the supply that you are arranging. This is explained in further detail in section 3.
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.
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:
For further information about input tax, you should refer to Notice 700 The VAT Guide and Notice 706 Partial exemption.
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.
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.
If the place of supply of your service is in another member State:
It is best to contact the relevant member State to obtain the correct information for your supplies.
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:
You can find more information about insurance services in Notice 701/36 Insurance and Notice IPT2 A general guide to IPT.
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.
If you act as the initial intermediary in arranging zero-rated passenger transport, such as:
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.
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.
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.
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).
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.
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.
We would be pleased to receive any comments or suggestions you may have about this notice. Please write to:
HM Customs and Excise
Input Tax Team
4th Floor East
New Kings Beam House
22 Upper Ground
If you have a complaint please try to resolve it on the spot with our officer. If you are unable to do so, or have a suggestion about how we can improve our service, you should contact one of our Regional Complaints Units. You will find the telephone number under ‘Customs and Excise - complaints and suggestions’ in your local telephone book. Ask for a copy of our code of practice ‘Complaints and putting things right’ (Notice 1000). You will find further information on our website at http://www.hmce.gov.uk.
If we are unable to resolve your complaint to your satisfaction you can ask the Adjudicator to look into it. The Adjudicator, whose services are free, is a fair and unbiased referee whose recommendations are independent of Customs and Excise.
You can contact the Adjudicator at:
The Adjudicator's Office
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