# Vat travel agents



## oldnick (26 Jun 2009)

I'm a travel agent. In the recent Finance ACT vat is to applied from 1/1/10 to our hitherto VAT exempt trade -but only on our "profit margin".

I have to still to find any explanation of what this means -either on any Revenue or other web site , or when i phoned the VAt interpretation people in Dublin Castle.

Travel agents are now taking bookings for next year -Winter holidays, ski trips, honeymoons. And yet we have no guidance from the VAT people. No
literature, forms  -nothing.

Is there a VAT expert out there who knows what this means -or at least point me in the right direction?


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## Graham_07 (27 Jun 2009)

I have had travel agent clients in the past (not presently) and I believe there have been some meetings and calculations in recent month over  VAT and travel agent/tour operator businesses ? This came through ITAA I believe and one of the big 4/5 accountancy firms is doing work on it. Perhaps check with ITAA ( if you're a member) they might have more on the proposed changes.


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## Graham_07 (29 Jun 2009)

Just an addition to this I've been speaking this morning with a lady who works in a T/A & T/O business and who has a reasonable knowledge of the VAT issue. Apparently it is all still very much "in the air" and there seems to be no firm policy on how this is going to be implemented. There may even be a question of a deferrment of the commencement date. If I hear more I'll post again.


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## oldnick (29 Jun 2009)

Thanks Graham.
Regardless of the VAT decision at least a third of independent retail agents will close in a few months. Add the VAT decision and it'll be another third-including me !


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## BPC (2 Jul 2009)

The new travel agents margin scheme (TAMS) only applies to principals acting in their own name, not travel agents.  Essentially VAT applies to the profit margin which is the sales price less the cost of certain services which may be bought-in e.g flights, accommodation but not general overheads.

Travel agents acting exclusively as agents i.e. not principals will not come within the remit of the TAMS.  However, agents will be obliged to charge VAT at 21.5% on their commission.

Revenue are currently finalising the VAT Regulations which will accompany the new Section 10C of the VAT Act.  The Regulations are expected to be signed into law before the Dail breaks for the summer.  A Revenue info leaflet is expected to issue around this time.

If you search the VAT pages of the big 4 accountancy firms you will find some literature outling the basic overview through their various tax publications.


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## oldnick (3 Jul 2009)

many tks -bpc.
What you say is what i feared -that we will have to increase the price of everything we sell -just at a time when most people are either not booking travel or, when they are, they're booking on the internet.

Well, I knew this business wouldn't last for ever -but adding VAT and getting involved in all the paperwork will certainly get rid of most of us more quickly than anticipated.


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## BPC (4 Jul 2009)

oldnick,

from your previous posts, it sounds like you are a travel agent i.e. acting exclusively in your own name and not as principal in your own right. Consequently, you will be outside the remit of TAMS.  While you will be obliged to charge VAT on your commission, presumably the comission earned comes from the "tour operator" i.e. principal.  The principal will be entitled to reclaim this VAT and you will be entitled to reclaim most of the VAT you incur on your everyday business costs.

So it may work out ok for you!!


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## oldnick (12 Jul 2009)

BPC - I've been away for a week and just today seen your last post and wanted to say thanks.


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## missc (23 Aug 2009)

I am in the process of setting up my own travel agency and am a bit anxious after reading about the VAT that we will now have to charge our customers.  I was just wondering if as a travel agent you packaged the holiday for the client ie bought the flights and accommodation separtely would you still have to charge the vat on the commission.  Would the tour operators because they are able to reclaim the vat not charge it to the clients in the first place? Also if clients are booking on the internet would they still have to pay VAT?


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## Graham_07 (23 Aug 2009)

missc said:


> I am in the process of setting up my own travel agency and am a bit anxious after reading about the VAT that we will now have to charge our customers. I was just wondering if as a travel agent you packaged the holiday for the client ie bought the flights and accommodation separtely would you still have to charge the vat on the commission. Would the tour operators because they are able to reclaim the vat not charge it to the clients in the first place? Also if clients are booking on the internet would they still have to pay VAT?


 

There are major changes afoot regarding VAT and travel agents. You should look in to this as a matter of urgency, especially if you are considering setting up as a TA . I do not wish to rain on your parade but this is a very difficult time for TA's. Margins are tighter than ever ( before considering the introduction of VAT on some services) , internet bookings are higher than ever, the economic situation has meant TA's are at a severe disadvantage compared to internet / TO direct bookings. I have had clients exiting TA business as a result reductions in margins. I'd tread very carefully. If you are a member if ITAA I'd ask them about the VAT situation. The Commission for Aviation Regulation may also have some information on this. VAT is not yet in but is imminent in certain situations. If you have an accountant/auditor they should be looking at this for you.


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## missc (23 Aug 2009)

Thank you for your reply. I will call the ITAA and CAR first thing to see what information they have regarding this issue. I think there will always be a need for travel agents someone that you can sit down and speak to regarding your holiday plans. I have worked in the industry for over 9 years and although the changes in recent years have been dramatic I think it will pick back up. There will always be people that want to book on the internet and source their own holiday but there are also people that would prefer to book with a TA as they feel more secure and value our advice. The fact that so many TA are closing means there are more potential clients out there.


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## Sconhome (24 Aug 2009)

missc said:


> The fact that so many TA are closing means there are more potential clients out there.



Why do you think they are closing? Are you sure this business plan has been thought through?


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## Graham_07 (24 Aug 2009)

The reason they are closing is reduced margins and reduced footfall. There will always be a need for some travel agents but not 3 in each town. I wonder if the business wil become more focused, TA's handling the things people are not happy booking on internet themselves, that all important honeymoon or long haul major trip or such. But the day's of TA's as we know them are seriously numbered.


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## missc (24 Aug 2009)

I agree there were too many travel agencies at one stage all offering more or less the same thing.  Peoples needs have changed dramatically and I am sure that by listening to my customers needs and satisfying them this will help me to grow my business.  I am passionate about travel and now is the time for me to branch out on my own and offer clients what they are looking for.  I think that one of the good things to come with this recession is customer care and satisfaction people are getting more for their money and value good customer service.


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## missc (24 Aug 2009)

Hi, I have looked at the other agencies and have see why they are closing some people did not work hard for business they just expected to get it when times were good.  It is very seldom you see any advertisements for holiday companies.  Now the tables have turned and people have to start working hard for sales and offering more then what customers expect some companies are not willing to change with the times.  it is so often seen that when people within the company start to loose interest in what is happening the company starts to go under and staff moral is low.  Companies that succeed and beat this recession are the companies you will see expanding in a few years as they are not afraid of hard work and getting their hands dirty.


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## Graham_07 (24 Aug 2009)

missc said:


> I think that one of the good things to come with this recession is customer care and satisfaction people are getting more for their money and value good customer service.


 
I have definitely noticed this more and more lately in various businesses. The days of "are ya alroi" are, thankfully becoming less and less as businesses look more to customer service.


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## John Rambo (24 Aug 2009)

Revenue have issued formal guidance notes on the operation of the margin scheme:

http://www.revenue.ie/en/practitioner/law/statutory/index.html#section2009

I would also be of the opinion that this industry is not one anyone should be rushing into get involved in.


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## oldnick (1 Sep 2009)

I thought this thread I had started had died and only have just seen the latest posts.

 I am a travel agent.
I am convinced that there will be very few of us left in a year. 
(When i talk about travel agents I mean street level or shopping centre shops open to the public -not business travel agents that are usually located in offices)

I opened my first shop in Dublin city centre thirty years ago. Until a few years ago I had five branches and have slowly but carefully been closing them. 
I'm now left with one which until now is trading profitably,but i'm in an area where people don't use the intnet or credit cards so much and prefer the personal touch.
Most of travel agents are not so lucky.....

In County Dublin there are now only 20 independent retail travel agents
(i.e. shops that are not owned by tour operators, but even they are closing their own retail outlets. ). I think only two are under fifty.
 Most travel agencies in Ireland now have only a couple of staff.

There are many reasons why the business is declining. The internet has caused a steady decline -but the main reason for the recnt spate of closures is that for the last year people are booking far less travel; certainly of high value. 

High rents are also big problem -hence only a handful of Dublin city centre agents.  
And the cost of obtaining the travel agents bond,the obligatory audited accounts(no self-assessment as with many small traders) and other government regulations are a burden not share by internet providers.

*And now VAT* !! -which still has not been explained to us. The formal guidance notes mentioned by Rambo above clarify nothing. Does the new VAT regulations from 1 January mean that we now get involved with VAT on anything we sell as a so-called "principal" - a flight and hotel booking? Just a flight? A booking fee? What exactly ?
The VAT rule may be the last straw for me. I'm old and don't need more paperwork.

The only thing that will save many retail travel agents is a quick return to recent travel patterns -and/or the collapse of a large direct-sell tour operator that still has several branches around the country.

Do I sound a tad pessimistic? Well, there may be hope for ambitious optimists like "missc" above who I'm sure won't be crazy enough to fit out and pay rent for a well located shop.  A pleasant office upstairs at a quarter of a shop rent offering up-market or unusual travel services may be the way to go...
Thats what i'd do if I hadnt have turned into a grumpy old pessimist.

Anyway, "missc" you're welcome to ask me any questions about opening a travel agency.Maybe 10% of what i tell you may be useful!
Good Luck.


p.s. If any of the contributors to this thread actually know what the new VAT rule means in practise PLEASE tell me ? I'm asking exactly the same question as at the start of this thread two months ago. i've rang and written to the VAT people and am constantly told -with increasing embarrasment I suspect- that guidance notes "are on the way"


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## oldnick (15 Sep 2009)

Sorry to bring this up again.
Do any of you accounting types know whether it is normal for VAT people to delay so long in introducing rules and regulations. Travel agents still dont know what's going to hit them in a few months.
i thought by time an infornation lefalet would have been useful .
Our main problems is we dont know what a travel agents margin on which VAT will be imposed actually is ?
Is it on anything we sell? Just a ticket? A tour operaors holiday ?
Does it apply to  nonEU travel ?

This may kill the travel agents quicker than the internet and the recession, thus depriving the govnt of the rveneue it had hoped to derive from the travel trade. The public will just book more on the internet and pay no VAT on each indidivual component.


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## Graham_07 (15 Sep 2009)

Hi Nick, 

Anything "new" can throw Revenue a bit until they get their head around it and ensure that all possible angles are covered. I know it seems like little time until this all comes in and I don't envy the poisition of TA's in the new regime. Administratively it will be a bit of a nightmare. 

I heard "on the grapevine" that the ITAA might be looking at trying to get independent VAT experts in to show TA's at a series of seminars how this is to work. Maybe check with them if you're a member and see what's happening. They have a major committee formed to deal with this area I believe. 

I wodner if now is the time to be looking at that retirement villa in Santorini or Lanzarote ?


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## oldnick (15 Sep 2009)

Thanks Graham.

Yeah, I reckon it's going to be more hassle than its worth. Frankly, if we have to add VAT on to the proft margin not only does this make us even less competitive cf. the internet, it's also extra paperwork we don't need in a profitless business.

I note that besides Budget sacking 100 staff and closing 14 shops, Falcon have started to shut shops and have made 50 staff redundant.  Both Budget and Falcon have all their remaining staff on three day week. There are now about 200 travel agency retail outlets cf 350 two years ago. 
In a few weeks there'll be far less. In a year perhaps a 100.

The crazy thing is that most of my surviving collagues seem unaware of the consequences of the new VAT legislation.  I'm not in ITAA but know they're in discussion (argument) with the VAT Intepretation people who still seem to be struggling to get their heads around the new law. 

This new law will close many of us and thus will produce no extra revenue. Instead, there'll be more on the dole and it will cost the govnt; a common consequence of new  or increased taxation.

As regards that Greek villa- funny you said that;  I am presently trying to sell mine !! (no joke -on island of Samos -more a gite than a villa).

Anyway, Graham, you seem to know more than anyone I've talked with.
Many Thanks !


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## missc (7 Oct 2009)

I have registered for the VAT course offered by the ITAA and am going to attend the seminar on the 22nd of October.  There was one held in Dublin on the 6th October but the feedback I have received from some of the agents that attended is somewhat vague.  I’ve heard mixed reviews like charging vat on part of a cruise that is in European waters and not charging vat on the part of the cruise outside Europe.  
I am hoping to open a retail shop on a main street but due to this 'recession' the rent has come down which is a good thing for me starting out.  I am also going to specialize in certain products and target certain profitable niche markets.  I know there is doom and gloom everywhere you look and we Irish always seem look at the bad e.g. horrible weather then when the weather is nice it’s too hot.  I believe that the numbers of agencies doors that have closed have left the door open for me and by god am I going to wk hard for them bookings.  
I may be very naive but if I don’t try I will never know what could have been.  I would love to hear more from oldnick and appreciate all your comments.


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## oldnick (9 Oct 2009)

missc - I don't know whether you're crazy or plain brilliant. Every second agent is closing and you want to open. You deserve success !

I'm unsure why you'd want to open on a main street and yet specialise in niche markets, but you seem to have researched it and you may have found the answer that eludes the rest of us...

Have you done your homework re the barriers that the government put in place ?
e.g. 4% of your estimated turnover must be in the form of a bond. that is ,for every million you sell you must give a 40 grand bond (cash, bank-bond or similar) to the govnt. Plus they want to see a start up capital  roughly equal to 4% of estimated t.o.  
(I assume you've read aviationreg.ie and got the leaflets from them)

 In any event,  fitting out a shop, the first years rent and the cost of one other member of staff would cost between 70-100k depending where you are. 
That's besides paying yourself and other running costs -from legal, accountant and other fees, ESB,phones, computers.

You must be willing to spend/risk  100.000 euros in that first year -if you reasonably sure you'll get it back in first year sales that'll be great. Otherwise ......

As regards the VAT issue -if you're not involved in sales to EU countries it's not so bad. Sales to EU destinations involve costs and paperwork.
The ITAA seminar this week was too short and everybody was a bit too stunned to ask the right questions -and thus the speakers may not have addressed the issues that concern agents - but hopefully the one on the 22 nd will have better prepared speakers and agents. 

...so. how much will you pay me when I close my main street shop and come to work for you as an aged part-time consultant ??!!

Seriously, contact me if you need any info, advice -or just an old travel agents opinions.


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## Fufidus (26 Mar 2010)

Nick, i'm glad to have found your post. I am currently in the process of setting up a travel agent for a niche market and would really appreciate the chance to get some advice!


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## oldnick (1 Apr 2010)

fufidus - have sent you a PM check your mail.


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