HM Revenue and Customs Brief 62/07
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Issued 09 October 2007
Commission earned by sub-agents in the travel industry
This Revenue & Customs Brief sets out a change in our interpretation of how
VAT law applies to the treatment of commission earned by sub–agents in the
Para 2.6 of Public Notice 709/6 Travel agents and tour operators states:
“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-
There is no change if sub-agents provide services which facilitate the making
of supplies, such as a simple introduction. In this case, the place of supply
for this service is where the sub-agents are established. Where this is in the
UK, their commission will be liable to VAT at the standard rate.
However, if sub-agents are involved in the making of arrangements for travel
services, then the place of their supply will follow the normal rules for
supplies by intermediaries. This will depend on:
- where the underlying arranged supply is made; and
- (where this is in the EU) whether the customer is EU VAT registered.
VAT Notice 741 Place of supply of services sets out these rules in more
The liability of the sub-agents’ supplies for which they receive the
commission will follow that of the underlying supply. Where they are involved in
the provision of specific supplies of zero-rated passenger transport, their
commission for those transactions will also be zero-rated. Where they are
involved in the provision of a package supplied by a UK tour operator under the
Tour Operators’ Margin Scheme, their commission will continue to be
The “making of arrangements for” travel services does not include supplies of
market research, advertising, promotional or similar services. Supplies of these
services will continue to be standard-rated, as will payments received from the
providers of computerised reservations systems in respect of travel agents’ use
of these sites.
The vast majority of supplies made by sub-agents are to other VAT registered
businesses, which are able to recover tax deducted. This change, therefore, will
be broadly revenue neutral.
Businesses are not required to correct past declaration errors which were
made on the basis of our earlier interpretation of the law. The second article
of Business Brief 28/04 sets out our policy on correcting liability errors and
gives more information on how to do this.
Businesses may apply the zero rate, where appropriate, with immediate effect,
and otherwise should do so no later than 1 November 2007.
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Article Published/Sorted/Amended on Scopulus 2007-10-18 23:50:55 in Tax Articles