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The law concerning the making of arrangements for passenger transport is in the VAT Act 1994, Schedule 8, Group 8, item 10(b):

Item No.

10. The making of arrangements for -

(b) the supply of any service included in Items 1 and 2, 3 to 9 and 11.

Group 8, item 10(b) zero-rates the services of an intermediary making arrangements for certain supplies which are themselves zero-rated under Group 8. This includes the making of arrangements for a supply of passenger transport which is itself zero-rated under Item 4.

The intermediary’s customer may be the supplier of the passenger transport, the purchaser or both.

Item 10(b) does not apply to the making of arrangements for:

• a supply of goods; or
• the supply of a designated travel service or a margin scheme supply, even if it relates to passenger transport, since Item 4 of Group 8 does not apply to designated travel services. The making of arrangements for such supplies is therefore standard-rated: see V1-23 Schemes, Chapter 12 Notice 709/5 Tour operatorsâ€� margin scheme and VTRANS021000.

The general treatment of agents for VAT purposes is explained in V1-5 Taxable person, chapter 2, Section 2A and in Notice 700 The VAT guide Section 10.

The place of supply rules relating to intermediaries� supplies are in VATPOSS09000 and Notice 741A Place of supply of services Section 8.

Example:

A newsagent sells tickets for bus, coach or train services. Provided the transport being arranged is itself zero-rated under Item 4 of Group 8, the making of arrangements for the supply, for which the newsagent receives a commission, is zero-rated under item 10(b).