Travel agents: linked bookings become packages in April 2027

From 6 April 2027, when a customer books a flight and a hotel with a travel agent on one visit, choosing and paying for each separately, the trip will count as a package holiday. Today it is a "linked travel arrangement", which carries much lighter rules. The change applies to bookings made from that date, so the agency that still sells this way next spring takes on a package organiser's duties for the whole trip.

What the new rules do

The Package Travel and Linked Travel Arrangements (Amendment) Regulations 2026 were made on 22 April 2026. Three changes matter to a small agency.

• A new kind of package. Travel services bought under separate contracts with different suppliers become a package where one trader facilitated the separate choice of, and separate payment for, each of them on a single visit or contact. A shop counter, a website and a phone line all count as the point of sale.

• No more linked travel arrangements. The category is removed altogether.

• A refund right against suppliers. A supplier that cancels or fails to provide a service in a package must refund what the organiser paid it within 14 days.

Contracts made before 6 April 2027 stay under the current rules.

What it costs

For a linked travel arrangement, an agent has to protect only the payments it receives itself. A package organiser must provide security to refund every payment travellers made for services not delivered because of its insolvency, and, where transport is included, to bring them home. That security comes as a bond, as insurance or as money held in trust. Packages that include a flight are normally protected instead under ATOL, the Civil Aviation Authority's scheme. The April amendments changed the ATOL rules' definition of a trader but not their definition of a package, so whether ATOL reaches the new kind of package is a question to put to the CAA before next spring.

Each route has a price: a bond or a premium, or customers' cash sitting in a trust account rather than in the business. It belongs in next year's budget now, not after the first booking in April.

The VAT question to ask now

The package rules decide who answers to the customer. They do not decide your VAT. HMRC's guidance for travel agents says "what matters is how you are acting, not what you call yourself". One of its tests for acting as an agent is that "you are not taking any significant commercial risk" in the services you arrange.

An agent that answers for a family's whole holiday is carrying more risk than one that answers only for its own booking service. Whether that changes anything is a question of fact about your contracts. It matters, because travel bought in and resold as a principal falls into the Tour Operators' Margin Scheme, with VAT on the margin and no reclaim of the VAT on that bought-in travel. Our page on how a travel agency's sales split between commission and the margin scheme sets out where the line sits.

What it looks like on one booking

Illustration, not a real client. A two-person agency in Southall books a family's holiday. On one visit the family chooses return flights to Dubai and pays the airline £2,400 direct, then chooses a hotel and pays the agency £1,600, which it passes to the hotel.

• Booked today, that is a linked travel arrangement, not a package, because the hotel was chosen after the flight was paid for. The agency protects only the £1,600 it received, and it is not responsible for how the flight and the hotel are delivered.

• Booked on or after 6 April 2027, the same booking is a £4,000 package with the agency as organiser, liable to the family for the flight as well as the hotel. Its security must refund any payment for a part of the trip that is not delivered because the agency fails, such as the £1,600 if it fails before paying the hotel, and bring the family home if its failure strands them abroad. If the hotel cancels the week before departure, the agency answers to the family, and the hotel owes the agency the £1,600 the agency paid it, within 14 days.

Before next April

1. Sort your sales into single bookings, packages you already sell, and separate bookings made on one visit that will become packages.

2. Get prices for a bond, insurance or a trust account, and settle how you will sell anything with a flight in it.

3. Rewrite your booking terms and supplier contracts, including the 14-day refund right.

4. Take the new terms to whoever handles your travel agency accounting, so the agent or principal question is settled before the first sale, not after a VAT inspection.

For the customer, the change adds protection. For the agency, it adds cost and responsibility, from the first booking on 6 April.

About the author

Harvey Dhillon is the founder and CEO of Zmartly, a UK accountancy firm for small businesses. He grew up in West London and began his career in investment banking finance at Barclays, before going full-time on Zmartly in 2020. He is a Chartered Management Accountant (ACMA, CGMA).

Featured photo by Alexander Schimmeck on Unsplash.