Guest007 Registered Posts: 54 Epic contributor 🐘

How does the VAT work for this?

If setting up a business of a having a website providing hotel accommodations around the world. They will have a supplier who will provide them with the inventory. They charge 5% service and what they have come to understand is that they need to pay VAT on the 5% and not the billing value of the bookings.

Also will the same apply to B2B and B2C?

Very confusing!


  • stevo5678
    stevo5678 Registered Posts: 325
    Not easy

    This is not straight forward and you should seek specialist advise from a VAT department from a larger practice or use consultants such as taxwise.

    VAT is due on sales depending on the 'place of supply' If it's a B2C transaction place of supply is always the selling business's residence. If it's B2B place of supply is always the customer's country of residence.

    So if your client is providing services to another business within the EU chances are this should be zero-rated, unless it is a UK business customer. (There may be special rules for travel as the customer may be a business sometimes and Joe public others.)

    If they bill a UK customer then I don't see how they don't charge VAT as it is the end consumer who always pays the VAT. If your client doesn't charge it then how will the customer ultimately pay the VAT? I think (maybe guessing) that for UK transactions your client should charge VAT to the customer and then the supplier should charge your customer his costs plus VAT. If the margin really is 5% like they state then your client will only be paying VAT on this but this will be the net effect of the VAT he has charged to the consumer and the VAT he has been billed from the supplier. EG Consumer gets charged £105 plus VAT = £126 (£21 vat). Supplier charges your client £100 plus VAT = £120 ( £20 vat). Paid to HMRC = £21 less £20 being £1. This is VAT on the profit of £5 (5%) being 5 x 20%.

    However there are 'undisclosed agent' rules. If your customer is acting as an agent the end consumer should be aware of this and who the real/ultimate service provider is. This will involve contracts etc. The other option is that your client doesn't bill the consumer himself, the supplier (hotel provider) bills them (in advance or when they check in)and your client simply sends invoices for the 5% commission (plus vat if above the T/O limit).

    Your client by the sounds of it should only be paying any VAT on their profit which is the commission.

    There's more than one issue here (re place of supply etc) and I would seek specialist advise, or indeed see if HMRC's technical VAT dep. can assist you.

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