Flights you buy and resell in your own name to travellers fall within the Tour Operators' Margin Scheme (TOMS), even when sold flight-only. Tickets arranged as a disclosed airline agent, with readily identifiable commission, follow normal VAT rules outside TOMS. Your contracts, and how you actually act, decide which treatment applies.
The same aircraft seat can produce different accounting entries in your business.
This article covers flights bought for resale to travellers, including business customers buying travel for their own use. For the wider framework, read the Tour Operators' Margin Scheme explained.
How do you know whether you sell flights as an agent?
Your trading name and job title do not decide your status. You can act as an intermediary on one booking and as principal on another. The treatment follows what you actually do (709/6 paras 1.4 and 1.5).
As an intermediary, you arrange a supply for someone else, your principal. For an airline agency sale, that principal is the airline. All three of these tests must be met (709/6 para 2.1):
- You and your principal have agreed that you act as their agent. You can demonstrate this, normally through an agreement or contract.
- You routinely disclose the principal's full name, for example on tickets or in booking terms.
- You take no significant commercial risk in the services you arrange.
Receiving a payment called commission does not settle the question. The documents, including how you advertise the supply, still matter (709/6 para 1.6).
Ticketing through the International Air Transport Association (IATA) Billing and Settlement Plan (BSP) usually means issuing the ticket as the airline's agent, with the airline named on it. The three intermediary tests still decide your status (709/6 para 2.1).
Committing to pay for a block of seats, sold or unsold, points towards significant commercial risk. This makes agency harder to demonstrate (709/6 para 2.1).
What VAT applies to airline commission and fees?
For an intermediary, the value of your service is your commission or fee, excluding any VAT. The amount collected for the airline is a separate part of the transaction (709/6 para 2.2).
If you are the initial intermediary arranging zero-rated passenger transport, your arranging service is also zero-rated. This includes scheduled flights (709/6 para 3.6).
As a sub-agent, meaning an intermediary acting for another intermediary, your service is standard-rated when supplied in the United Kingdom (UK) (709/6 para 2.6).
Where your agency commission is readily identifiable, exclude it and the money collected for the airline from your TOMS calculation (709/5 paras 6.1 and 6.7).
There is an exception for mixed businesses. If you already use TOMS for own-name sales, variable or otherwise unidentifiable agency commission enters the calculation. Include the agency income and directly related costs (709/5 para 2.14).
Are own-name flights included, and does the destination matter?
If you resell bought-in flights as principal or undisclosed agent, you must use TOMS. An undisclosed agent acts in their own name (709/6 paras 4.2 and 5.2; 709/5 para 2.3).
Passenger transport is always a Margin Scheme supply when the bought-in resale conditions are met. You buy it from another supplier and resupply it without material alteration for a traveller's direct benefit. A single flight qualifies without adding a hotel (709/5 paras 2.7 and 2.9).
The margin on a domestic UK flight is standard-rated. For a journey without stops that begins or ends outside the UK, you may treat the travel as enjoyed wholly outside the UK. That makes the margin zero-rated (709/5 paras 4.8 and 4.10).
Connected flights count as one journey if the next flight is international and the connection is made within 24 hours of scheduled arrival, or domestic and scheduled within six hours of scheduled arrival (709/5 para 4.12).
Include the full seat purchase cost, including any Air Passenger Duty (APD) payable. Match the purchase costs to the sales included in that financial year's calculation. You cannot reclaim VAT charged on seats bought for resale as Margin Scheme supplies (709/5 paras 4.4 and 6.3).
You must carry out the TOMS calculations even if all your supplies are zero-rated (709/5 para 5.14). A nil tax rate does not make the paperwork disappear.
How do the two types of flight sale compare?
Illustrative example, not a real business.
An agency in Leeds sells flights two ways in the same month. It issues £50,000 of scheduled-flight tickets as the airlines' agent. It earns £1,500 in readily identifiable commission and fees.
As the initial intermediary arranging zero-rated passenger transport, its £1,500 arranging income is zero-rated (709/6 para 3.6).
The £50,000 ticket money and the readily identifiable agency income stay outside its TOMS figures (709/5 paras 6.1 and 6.7).
The agency also buys 40 seats to Malaga in its own name. They cost £180 each, £7,200 in total including APD. It sells them flight-only at £240 each, £9,600 in total. These are direct flights ending outside the UK.
| Own-name seat sales | Amount | TOMS treatment |
|---|---|---|
| Sales of 40 seats at £240 each | £9,600 | Step 1 sales |
| Cost of 40 seats at £180 each, including APD | £7,200 | Step 3 costs, travel enjoyed outside the UK |
| Sales less seat costs | £2,400 | Zero-rated margin |
The own-name seats are Margin Scheme supplies. The £9,600 enters step 1 and £7,200 enters step 3 of the year-end calculation (709/5 section 9, steps 1 and 3).
The £2,400 margin is zero-rated because the direct flight ends outside the UK. The journey may therefore be treated as enjoyed wholly outside the UK (709/5 paras 4.8 and 4.10).
What should you check in your booking records this quarter?
Leaving own-name overseas flights out understates both step 1 sales and step 3 costs. In a mixed UK and overseas calculation, that distorts the figures used to split the margin. It can also skew next year's provisional percentage, which draws on the preceding year's calculation (709/5 section 9, steps 1, 3 and 10 to 13; section 10, steps 1 and 2).
Own-name Margin Scheme flights count at their margin towards taxable turnover. Taxable agency commission counts at its full value, and zero-rated amounts count too (709/5 para 4.1).
Give agency tickets and own-name seats separate codes in both your booking system and ledger.
We suggest this short quarterly check:
- Sample bookings from each flight code and read the supporting agreements.
- Check that agency tickets name the airline and match the agreed agency relationship.
- Separate initial intermediary income from income earned as a sub-agent.
- Match own-name seat sales to supplier costs, including APD.
- Record routes and connections so the UK or overseas classification can be checked.
- Trace both categories from booking reports into the ledger and calculation.
Our guide to building TOMS figures from your booking data develops this practical approach.
If your records mix airline agency sales with seats sold in your own name, we can help review the distinction. Our accountants for travel agencies and tour operators can work through the agreements and booking records with you.
Frequently asked questions
Is a flight-only sale in TOMS?
Yes, if you buy in the flight and resell it in your own name to a traveller. Passenger transport is a Margin Scheme supply, so TOMS can apply without accommodation or other package elements. A flight arranged as a disclosed airline agent, with readily identifiable commission, falls outside the scheme.
Does issuing tickets through BSP make me the airline's agent?
Ticketing through the International Air Transport Association (IATA) Billing and Settlement Plan (BSP) usually points towards agency, with the airline named on the ticket. It does not settle your status. You must have an agency agreement, routinely disclose your principal and avoid significant commercial risk in the services arranged.
What VAT is due on my flight commission?
Your arranging service is zero-rated if you are the initial intermediary arranging zero-rated passenger transport, such as a scheduled flight. If you act for another intermediary as a sub-agent, your service is standard-rated when supplied in the United Kingdom. Calling a payment commission does not establish agency status; your contracts and other paperwork must support that treatment.
Can I reclaim VAT on seats I buy to resell?
You cannot reclaim VAT charged on seats bought for resale as Margin Scheme supplies. Include the full purchase cost in the margin calculation, including any Air Passenger Duty (APD) payable. Match those costs to the sales included in the calculation for that financial year.
Sources
Every rule in this article was checked against these pages on 22 October 2026.
