Wisetax Accountants

24/11/2025

Travel VAT Explained: Agent Commissions for Disclosed Agents — What You Really Need to Know

In recent months, there’s been a surge in questions around one of the most misunderstood areas of travel VAT: agent commissions when acting as a disclosed agent.

It’s no surprise — this area is a genuine minefield for travel agents, OTAs, booking platforms, and anyone else sitting between the traveller and the supplier.

Here’s a simplified guide to help you stay on the right side of VAT rules (and avoid overpaying tax unnecessarily):

🔎 Step 1: Identify Your Actual Customer

Your “customer” isn’t simply the person you speak to — it’s the entity contractually obligated to pay your commission or fee. This could be:

A travel supplier

A business client

An individual traveller

Another agent or tour operator further down the chain

⚠️ Get this wrong, and your entire VAT treatment can collapse.

🌍 Step 2: Determine the Place of Supply

This depends entirely on whether your customer (the one legally obliged to pay your commission) is B2B or B2C:

👉 B2C – Individual Customer

The place of supply for your commission follows where the underlying travel service occurs.

Example:
A UK agent books a hotel in Spain for a UK traveller →
Place of supply is Spain.
No UK VAT on your commission (but Spanish VAT may apply).

👉 B2B – Business Customer

The place of supply follows the location of the business customer.

Example:
A UK agency arranges UK travel for a French business client →
Place of supply is France, not the UK.
No UK VAT is due (the French business may need to account for VAT under the reverse charge).

💷 What VAT Rate Applies?

If your commission falls within the UK as its place of supply, the default VAT rate is 20%.

But it’s not always that simple.

Possible VAT outcomes:

Outside the scope of UK VAT

Zero-rated (common for passenger transport and overseas travel)

Standard-rated at 20%

And the complexity increases if your arrangement falls within TOMS or if you’re acting as a sub-agent.

🔑 Key Takeaway

Getting your VAT treatment right hinges on three things:

Who your true customer is

Where the place of supply falls

What VAT rate applies based on the scenario

Misclassifying just one of these can lead to overpaying or underpaying VAT — a common (and expensive) issue for OTAs and platforms.

💡 Time to Review Your Position?

If you’re an OTA or any business acting as a disclosed agent, now is the perfect moment to review:

Your contracts

Your invoicing structure

Your VAT reporting

A small adjustment could make a significant difference to your VAT efficiency.

15/09/2025

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11/09/2025

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29/08/2025

15/08/2025

Take the stress out of your finances with Slough's trusted accounting experts.
For over 15 years, Wisetax Accountants has been helping local businesses and individuals in Berkshire stay compliant, save money, and sleep better at night.

Why choose us?
✅ Local Slough experts you can meet face-to-face
✅ Fixed fees, no hidden surprises
✅ Same-day appointments available

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Ready to take control? Book your FREE consultation today.
📞- 07533 686857 / 01753 531892
🌐- https://wisetax.org.uk/
📩 - [email protected]

15/08/2025

With just seven months to go until mandatory Making Tax Digital (MTD) for Income Tax, HMRC has confirmed that 864,000 landlords and self employed will be caught by the quarterly reporting rules from day one

The first phase of MTD for Income Tax will kick in from April 2026 requiring individuals with a qualifying income over £50,000 to file quarterly returns using software with a final year end round out. The first quarterly filing date is set for 7 August 2026 and a new penalty system for non compliance will be in force.

Initially MTD will only affect higher earners in this cohort, but quarterly filing will be quickly rolled out to a wider audience with the threshold dropping to £30,000 in April 2027 dragging in 1,077,000 individuals, then falling to a negligible £20,000 from April 2028 with another 975,000 required to report.

Around 2.9 million (42%) of which have a qualifying income above £20,000 and will need to join MTD for Income Tax, based on self assessment figures for 2023-24.

From April 2026 businesses with a qualifying income over £50,000 will need to join MTD. Based on tax year 2023-24 there are 864,000 individuals with a qualifying income over £50,000.

For many of these landlords and self employed people, the new MTD requirements will be onerous, and they will be reliant on HMRC notifications about the changes as 25% of the £50,000 earners do not have an accountant or tax adviser.

Authorised agent representation falls in line with qualifying income. For those in the £30k-50k bracket, 37% do not have an accountant, while only 41% are represented in the £20k-30k band.

Of greater concern is the very large number of people who will need to invest in software to file their MTD reutrns. Currently only half of landlords and self employed used commercial software to submit their end of year self assessment tax returns.

Not only will they be faced with a total overhaul of the tax return process, but they will also have to shell out money for software, usually charged on a monthly basis for around £20, equivalent to an annual subscription cost of up to £240 a year.

For the software providers, MTD will be an absolute winner, with a captive audience required to buy software, in most instances, to comply with the government’s MTD rules.

For those that do not want to pay for a subscription, there are some basic software options available for free, including a stripped back software offering from Sage called Sage Accounting Individual Free, which is described as ‘ideal for freelancers with straightforward accounting needs’ and was launched in 2023.

When asked whether this would always be free, the company said ‘it was committed to offering a free digital tax solution’, but stressed that it was scalable as requirements became more complex for the customer.

Neal Watkins, EVP, small business at Sage, said: ‘We see this as a milestone that will enable businesses to focus more time on growth and we are committed to play our part by providing a free software tool that will help them spend more time on growing their business.’

At the same time, 37% of £50,000 plus individuals did not use software to submit their end of year return for 2023-24 meaning they will have to invest in software to file their quarterly returns, adding to business costs.

Going down the earnings scale, use of software drops off, with only half of the £20k-£50k bracket using software to file their tax returns.