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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 travel industry.

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- rated.”

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 detail.

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 standard-rated.

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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© Crown Copyright 2007.

A licence is need to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.



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Article Published/Sorted/Amended on Scopulus 2007-10-18 23:50:55 in Tax Articles

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