For UK Travel Agents Only: IHG Commission Services Billing Process
Introduction The IHG Commission Services program computes commissions due for participating travel agents worldwide. The functions carried out by travel agents are to book guests into IHG branded hotels, for which a commission is due at an agreed rate. The rationale for invoicing in accordance with the IHG program is that commissions are correctly calculated on occupancy rather than bookings made, so the IHG program provides correct commission calculations without the need for subsequent corrections as a result of cancellations. A simplistic view is that the travel agents provide services to the hotels, but this is not the correct legal structure. Each of the travel agents enters into an agreement with IHG for the provision of reservation services into the IHG estate. Meanwhile each of the hotel owners / franchisees enters into an agreement with IHG whereby it agrees to receive reservation services from the participating travel agents. Self-billing of travel agents services In the UK, the travel agents' services are supplied to IHG (but for the vast majority of travel agents the invoices are self billed by IHG). Thus travel agents do not issue invoices for reservation services and are precluded from doing so, having signed the self billing agreement. Hotel invoices IHG then bills the hotels, being a recharge of the reservation services. Hotel invoices are prepared monthly. Commission charges (plus VAT) billed are equal to the amounts charged by the travel agents to IHG. Transaction flows Reservation services (plus VAT) are provided by UK travel agents to IHG (although this may be evidenced by a self billed invoice); These commissions (plus VAT) are recharged by IHG to UK hotels; Commission payments are made to travel agents from the reservation centre in the USA with the self billed invoice; Hotels pay their commission invoices to the reservation centre in the USA If you are having trouble finding the answer you seek please Contact Us.
If you are having trouble finding the answer you seek please Contact Us.
What is self-billing?
Self-billing is an arrangement whereby the customer (IHG Commission Services) prepares VAT invoices on behalf of their VAT-registered supplier (the travel agent). The customer sends a copy of the invoice to the supplier with the payment. The self-billed invoices are not valid VAT invoices unless there is a written self-billing agreement in place.
What are the advantages of self-billing?
- Your customer (IHG Commission Services) is responsible for making sure that the VAT details on the invoices are correct;
- Your payment will be received on a regular basis – thus assisting with your cash flow;
- Commission payments are calculated on room occupancy rather than original booking history, thus eliminating the need for credit notes as a result of cancellations;
- It eliminates the need for you to follow up commission letters.
Do we have to agree to self-billing?
No, but we strongly recommend that you do in order to leverage all the advantages of IHG's centralised commission program which offers a streamlined precise method of handling your commission payments.
We have already agreed to self-billing. Why have you written to us again?
VAT legislation requires all self-billing agreements to have a duration of no more than 12 months following which they have to be renewed. However, IHG has obtained specific approval from HMRC that renewal is only needed every 24 months. At the end of this 24 month period IHG is legally required to obtain written approval from travel agents that self- billing may continue.
What do I need to know about self-billing?
For VAT purposes you will have to do all of the following:
- Sign and keep a copy of the self-billing agreement;
- Agree not to issue any invoices for bookings during the period of the agreement;
- Agree to accept the self-billing invoices that IHG issues;
- Tell IHG at once if you change your VAT registration number, deregister from VAT, or transfer your business as a going concern.