Special Report: Taxman spurs take-up of tax-paid incentives

Special Report: Taxman spurs take-up of tax-paid incentives

More agents are opting for tax-paid booking reward schemes as the government steps up its fight against tax avoidance. Juliet Dennis reports

A tax-free trade incentive programme launched nearly two years ago is rapidly growing in popularity as awareness increases of travel agents’ liability on receipt of incentives.

MoneyCard was set up by Funway Holidays in July 2013 following talks with HM Revenue & Customs and a bank.

Since then, Norwegian Cruise Line, If Only, and Collette have joined as partners, and more than 4,500 agents have signed up for the card and receive incentives on which the tax and national insurance have already been paid.

Operators load booking incentive funds on to the Visa debit card, which agents can spend like a normal debit card in shops of their choice.

Taxman crackdown

Critically, it offers agents a way to earn a tax-free cash incentive at a time when the government has publicly stated its intention to tackle tax avoidance.

According to Funway managing director Stephen Rhodes, MoneyCard is one of the only tax‑prepaid incentive schemes in the travel industry.

“Every other scheme I’ve looked at, apart from USAirtours’ CashCard, doesn’t pay the tax or national insurance; I have not found another operator which does,” said Rhodes.

“There are a number of competitors with similar schemes but they don’t make it clear if tax and national insurance is the agent’s responsibility; it’s hidden in the small print.”

He warned of dire consequences if the trade doesn’t take notice, particularly as HMRC could backdate tax owed on incentives.

“Agents could be accruing thousands of pounds in liability because HMRC would claim backdated monies going back at least four years. They really should not stick their heads in the sand on this issue. They should start paying the tax or only use tax-free incentive schemes.”

Many agents are still not aware of their liability to pay tax and national insurance on incentives, according to Rhodes.

“We did a survey of agents and it was about 50:50. Some were more aware, particularly owners, and there were others that were not aware or interested,” he said.

Nick Wilkinson, Norwegian’s business development director for the UK, Ireland and Scandinavia, added: “At agent head offices everyone is concerned about liability.”

On MoneyCard, for every £10 incentive paid to an agent, it costs the operator an extra £4.23 in tax and national insurance.

Despite the cost, Tom Higgins, marketing manager at If Only, is convinced more suppliers will be forced to set up tax‑prepaid schemes as agents realise the implications of taking incentives.

“HMRC will catch up with the trade at some point and there will be more schemes like this in the future,” he said.

Richard Adams, UK head of marketing at Collette, added: “It’s only a matter of time before HMRC clamps down.”

Benefits for suppliers

While agents who book these operators do not have to worry about the taxman catching up with them, for operators there is the chance to reward individual agents, rather than a shop, and the benefit of increased distribution.

Norwegian has paid incentives to more than 1,000 agents via MoneyCard since January 1.

“A lot of those 1,000 agents are new to Norwegian,” said Wilkinson.

“We have moved away from using vouchers to using money.”

Adams said Collette is also benefiting from extra bookings.

Funway’s sales are up 15% so far this year, a figure Rhodes attributes largely to MoneyCard.

“On the first weekend in January, we had 250 agents registering,” he added.Rhodes predicts Funway’s number of MoneyCard partners could grow to about 10, and all would be non-competing.

“I have been approached by a number of operators; I would envisage up to 10 as manageable,” he said.

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