How Travel Agents Must Account For VAT Using Bill Back Arrangements
We explain how travel agents must use the Tour Operators’ Margin Scheme (TOMS) to account for VAT
Q. My client is a travel agent working for the corporate sector, booking hotels for staff – mainly sales reps travelling around the UK. Although she has booked the hotel in the name of the company, naming the guest, and the guest obviously knows the hotel details, the hotel invoices her. Because she then invoices on to the business in her own name, does this mean she has to use the Tour Operators’ Margin Scheme (TOMS)?
A. A travel agent acting as principal, or as an undisclosed agent receiving and issuing invoices for the accommodation in their own name, would normally have to use TOMS. This would mean the agent not being able to recover input tax on the hotel, and the VAT is accounted for by them on the margin. The VAT on the hotel, within the price charged by the agent, would then be sticking tax for the business customer.
However, if agents from a business travel agencies act as disclosed agents and comply with the arrangements agreed between HMRC and the travel industry they can apply the ‘hotel bill back rules published by HMRC in Brief 21/2010. These are reproduced below. This avoids the need to use TOMS.
The agreed arrangements are:
invoices from hotels will be addressed c/o the hotel booking agent for payment (This is to indicate that the invoice has been issued to the hotel booking agent in its capacity as an agent);
booking field on the hotel invoice will identify the hotel guest, their employer and will ideally carry a unique reference number (until hotels can address their invoices directly to their business customers, it may be necessary for hotel booking agents to enter an employer identification number on the invoice);
hotel booking agent will arrange for payment of the invoice(s) but will not recover the input tax thereon;
hotel booking agent will send the customer a payment request/statement of the expenditure incurred by the hotel booking agent on its behalf, separately identifying the value of its supplies, VAT, etc;
payment request/statement should say something along the lines of 'the VAT is shown is your input tax which can be reclaimed subject to the normal rules;
customer will use the payment request/statement as a basis for their input tax reclaim;
hotel booking agent will retain the original hotel invoices and these will be made available if evidence of entitlement is required by VAT staff;
hotel booking agent will send a VAT invoice for its own services, plus the VAT. This may be consolidated with the statement of hotel charges, or it can be a separate document; and
hotel booking agent will charge its client the exact amount charged by the bill back supplier, as a disbursement.
If you’re unsure how to go about your business’s travel policies, refunds etc - find out if the business is using one of the professional business travel agencies out there, like TravelManor - if so, they should be able to address your questions.
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Article from https://corporatetraveltalk.wordpress.com/2021/05/13/how-travel-agents-must-account-for-vat-using-bill-back-arrangements/