Can Travelmole readers help?

Can Travelmole readers advise concerning the treatment of VAT for commission payments received? For instance, if an agent books a package holiday of £1000 from a tour operator and has negotiated 10% commission, the agent charges the tour op £100. Does the agent also then charge VAT of 17.5%, making £117.50 due to the agent and £882.50 due to the tour op? (The agent would later send £17.50 to the VAT office). We will presume that the customer paid in full at the time of booking. The above is how I thought VAT should be accounted for. However, the manager of a college travel agency/ tutor told me that the £100 the agent received would include the VAT to be sent to the VAT office – I can’t see how this can be the case as the agent would not then receive 10% commission. Any advice from travel agents or operators would be welcome. Julie Pearson