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New guidance as to what the selling price should and should not include.

The guidance around the Tour Operators Margin Scheme (VAT Notice 709/5) has been updated, including Paragraph 6.1, which details how to work out the selling price under the Tour Operators Margin Scheme.

It states that the selling price should include:

  • the total VAT-inclusive selling price of all your margin scheme supplies – if you make a charge for payment by credit card this is also part of your total selling price and must be included in this total
  • the total VAT-inclusive selling price of any in-house supplies which you have supplied together with margin scheme supplies
  • amounts received relating to any supplies, packaged with margin scheme supplies which you arrange as an agent, if your commission is not readily identified
  • forfeited deposits and cancellation fees received from customers who cancel bookings where these exceed 20% of the agreed price, when totalled, if you use method 2 to calculate tax points
  • if you sell through an agent, the full amount paid by, or on account of, the customer (even if the agent deducts a commission and you receive only the balance) – if the agent grants a discount to the customer and makes good this discount, your selling price is the amount paid by the customer plus the ‘top up’ amount added by the agent.

The selling price should not include:

  • any refunds made to customers for unsatisfactory service
  • the value of any packages of supplies which do not include any margin scheme supplies – you should account for VAT on these in the normal way
  • amounts collected by you as an agent, if your commission is readily identified
  • any discount you agree with your customer
  • forfeited deposits and cancellation fees received from customers who cancel bookings if you use method 1 to calculate tax points, or you use method 2 and have received 20% or less of the agreed price.

Article from ACCA In Practice