Agents will avoid Atol from fear of VAT, says finance expert

Agents will avoid Atol from fear of VAT, says finance expert

Department for Transport (DfT) proposals to extend Atol regulations to retailers will fail to plug the hole in consumer-protection funds, according to a leading industry finance advisor.

Chris Photi, senior partner at accountancy firm White Hart Associates, told an Abta travel law seminar yesterday: “If the government thinks the new ‘flight plus’ Atol will bring in more money [to consumer protection funds], they have another thing coming.”

The DfT is poised to launch a consultation on the extension of consumer financial protection that will see online and high street agents required to hold a flight plus Atol to cover sales of flights and accommodation sold separately.

Photi said retailers were desperate to avoid changing their legal status and would act as agents for the consumer to avoid the regulations. “Agent for the customer will run and run and decimate flight plus,” he said, listing a range of reasons why agents would not comply.

“There is the dreaded VAT Tour Operators’ Margin Scheme (TOMS),” said Photi. “I have not seen anything in writing from Customs and Revenue [that it will not seek VAT from flight-plus agents].

He said: “Agents do not want to be drawn into the regulatory regime – they don’t like the CAA financial criteria or Abta’s financial criteria. The CAA’s four-year bonding rule for new [Atol] applicants is unfair. There is a lack of bonding available. The responsibility to substitute arrangements in the event of a supplier failure terrifies agents. There is the lack of competitive insurance arrangements. And there is the issue of charge backs on credit cards – if a firm goes bust, the principal is left holding the tab.”

Photi added: “The fact that credit-card merchant acquirers regard agents as low risk compared with principals is a reason why firms wish to cling to agency status.”

He concluded: “Flight plus will not do what the government thinks until airlines are brought into the Atol scheme.”

However, Photi expressed optimism on two counts. He said: “I do expect Supplier Failure Cover to become more readily available, and I am more optimistic [than I was} that travel companies will be able to secure and maintain credit card facilities.”

On VAT, Kate Jennings – head of aviation policy implementation at the DfT – told the same seminar earlier: “We’re working closely with Revenue and Customs, whose position is there is nothing in the proposals that would make flight-plus Atol holders liable for VAT.” She said there would be reference to that in the forthcoming DfT consultation.


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