Are you an intermediary or principal?

If you're in the travel sector, you'll no doubt have kept a close eye on a landmark VAT case earlier this year involving HMRC and, now part of the Thomas Cook group.

To cut a 7-year long story short, the Supreme Court ruled in March that acts as an agent for hoteliers and not as an operator itself. HMRC had claimed it was acting as the latter, which would have made it liable for £7m worth of UK VAT.

The tax tribunals had been unable to agree on the matter and HMRC appealed to the Supreme Court, which ruled in favour of the travel company. Cue calls for VAT refunds from - another of Thomas Cook's brands - which operates a similar model.

At the time, the Supreme Court's ruling was said to provide "much needed clarity" for the sector. But if the tax authority, the tax tribunal and the appeals tribunal for tax cases can't agree on the rules, what chance do businesses in the sector stand of getting it right?

Generally, how you account for VAT depends on how you operate. There are 3 main ways of operating in the sector:

  1. Intermediary or 'disclosed agent'
    You list accommodation to travel agents and holidaymakers and you make the names of the hoteliers you act for fully available and visible. But the rooms are provided by the hoteliers themselves in whichever country they are located.
  2. Agent 'acting in your own name'
    You act as an intermediary - as described above - but you don't disclose the names of the hoteliers to the people you sell to.
  3. Principal
    You supply travel packages that you either buy in from other businesses or supply in-house using your own resources.

If you're an agent acting in your own name or a principal, you must use TOMS (the Tour Operators' Margin Scheme) to account for VAT on travel goods and services. TOMS allows you to avoid registering and accounting for VAT in each EC member state you sell to.

If you're a disclosed agent as described in point 1 above, you only need to account for VAT on commission that you are paid by the principals you act for and you do not need to use TOMS.

This is a simple summary of a complex regime. We can take the VAT burden out of your hands and help you understand your TOMS obligations.

Call us on 01375 383 888 to find out how you should account for VAT.

You can also fill in our contact form or email

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RM17 5RY

Tel: 01375 383888
Fax: 01375 391672