Net rates (often spelt “nett” in the UK) are typical from bed banks, consolidators, wholesalers and hotels contracted direct. They give the seller freedom over the selling price, and often a better margin, but the seller carries the margin risk and may have to pay the supplier up front.

An example

A hotel room bought at £100 a night net and sold at £118 leaves the seller £18 before costs and VAT.

Watch out for

• “Net” is used in two ways: a net rate with no commission built in, and “net of commission”, meaning the gross price less the agent’s commission, which is what the agent passes to the supplier. Check which is meant.

• Net rates often come with conditions, such as sale only inside a package or to closed user groups.

• Reselling a net rate in your own name usually makes you a principal for VAT, so the margin falls under the Tour Operators’ Margin Scheme. HMRC is clear that what matters is how you act, not what you call yourself.