WHA Travel Accountants

Reaction to the March 2012 budget

Mark Caldicott — Mon, 26 Mar 2012 10:04:38 +0000

Please refer to the link below for my initial reaction to the Chancellors speech and budget for 2012:-

http://www.travelmole.com/news_feature.php?news_id=2000841&c=setreg®ion=2

I also enclose a copy of our 2012 budget summary, which provides more detail into the Chancellor’s budget plans.

WHA Budget Summary 2012

The Travel Convention 2011

Mark Caldicott — Wed, 19 Oct 2011 11:15:41 +0000

Please click here for the presentation by WHA’s head of travel Chris Photi at the 2011 Travel Convention:-

http://www.thetravelconvention.com/video_chris_photi.php

HMRC’s New Penalty Regime

Nikki Spoor — Tue, 14 Jun 2011 07:18:01 +0000

From 2010-2011 H.M Revenue and Customs have dramatically increased the financial penalties for late submission of self assessment returns. These penalties are in addition to the increased penalty regime introduced in April 2009. Annexed is a resume of their new powers and new penalties which do not just relate to late submissions but also to errors. Caution needs to be exercised!

Link: HMRC’s New Penalty Regime

Understanding the annual investment allowance

Nikki Spoor — Mon, 04 Apr 2011 08:14:20 +0000

When the previous government doubled the annual investment allowance (AIA) from £50,000 to £100,000, the response was widely received in positive manner. It was also a way for the former government to keep our businesses spending to apparently “stimulate growth” within the economy. However, since the coalition government gained power the “goal posts” have subsequently moved. The chancellor has confirmed plans in the spring budget to reduce the AIA to £25,000. This reduction will take effect from 6 April 2012. This means that if you are planning to spend significant funds on plant and machinery, you should think about doing so before this date!

AIA explained
AIA is a form of capital allowance, which offers tax relief at 100 per cent on all qualifying expenditure in the year of purchase. The maximum you can deduct from your taxable profits is £100,000 (or the reduced rate £25,000 from 6 April 2012). This is adjusted for short or long periods, and also for periods that span the rates and dates of the allowance.

Almost all types of business entity can claim AIA, provided the business activity satisfies one of these criteria.

Trading entity: Commercial property letting; office or employment: or leasing. The only business structures which are not eligible for the AIA are “mixed partnerships” (that is, partnerships comprised of both individuals and companies) and trustees.

Please kindly note though, that there are a few exclusions. Splitting a business with related interests into a group of companies is a common tax planning strategy, but it won’t help in the case of the AIA. Why? The subsidiaries would not get a £100,000 allowance each, this would be shared between them. This is also the case for related companies under common control (“related” companies are those who carry out related activities or share a business premises). If you run a company which has a group structure we would recommend that you seek advice with taxation advisor who will assist with some tax planning.

When you exceed the first £100,000 threshold, a default rate of 20 per cent is applied to apportion the investment over subsequent years. So, if a purchases £190,000 worth of new machinery, it can allocate the first £100,000 of expenditure against the AIA and the remaining £90,000 would achieve tax relief at 20 per cent a year on a reducing balance. Please also note that within the spring budget the government has changed the default rate to 18 per cent from 6 April 2012.

You should also be aware there are a number of types of asset that would not qualify for the allowance, such as cars. Therefore additional advice should be arranged.
Investment in certain green technologies is eligible for enhanced capital allowances (ECA). These are in addition to the £100,000 allowance and, like the AIA, would be eligible for 100 per cent tax relief in the first year. A set of qualifying technologies is available on the ECA (Enhanced Capital Allowances) website. A link to this site is shown at the end of this article

Spending on repair or replacement is normally an allowable deduction against income and so full tax relief is given immediately. However, if the repair or replacement costs in the last 12 months are greater than half of the total cost of replacing an asset, the spending is treated as capital expenditure. For example, if a business spends £3,000 in the last 12 months repairing or replacing parts of its photocopier, but the total cost of replacing the copier is £5,000, then the £3,000 would be treated as capital expenditure and qualify for allowances at 10 per cent.

The sizable reduction to the AIA threshold from 6 April 2012 marks a large change for all businesses so therefore I believe it would be advisable that large outlay on plant and machinery is brought forward and utilised within the next 12 months. It effectively means the chance to save up to 50p in taxable profits for every £1 a company has invested in new equipment. Not an allowance to be sniffed at!

Enhanced Capital Allowances Website:- www.eca.gov.uk

Atol trust guidance palms off failure liability to agents

Chris Photi — Thu, 31 Mar 2011 10:59:58 +0000

Agents must sort out their ‘abysmal’ documentation, and the CAA must be clear who it is protecting, says Chris Photi
The Air Travel Trust Fund’s notice yesterday advising travel companies to make sure their Atol documentation is in order was not unexpected.
Bluntly, the sales documentation issued by many travel businesses is abysmal. This was highlighted particularly in the failures of Globespan and Goldtrail last year.
In this latest notice the ATTF spells out that it will not pay any consumer claim where an agent has not issued a correct Atol receipt in accordance with the CAA’s Official Record Series 3 Guidance – highlighted at the end of the press release under “notes to editors”.
This is not rocket science, but it is amazing how many companies do not follow these simple guidelines. Why?
Firstly, this industry is broadly driven by sales and marketing and IT motivators. I have often carried out a compliance review of paperwork for a company and established the correct documentation with their management team only to revisit a year later and find it has disintegrated.
Invariably the explanation is that the sales people didn’t like the layout or the transparency of pricing (the commission/booking fees/mark up etc).
Alternatively they indicate that their IT departments or IT solutions providers don’t like the requirements or have simply changed the format and not followed the advice given.
It never becomes a huge issue until the CAA or Abta come calling, or a tour operator for whom the business acts as an agent fails.
The second problem is that agents do not like to put customers into direct contact with the principals. If the customer has a clear Atol receipt and the corresponding Atol holder’s confirmation invoice then they may end up concluding that there is a saving to be had by booking direct.
Given recent events, I cannot see that the ATTF has any other option than to issue this notice. However, it does raise huge contradictions.
The advice issued yesterday speaks of concern about lack of clarity for consumers. However, there is every chance that a consumer’s claim will be rejected not because of confusion on their part but because of tardiness or an administrative error on the part of their travel agent.
If a customers finds they have no claim because of an incorrectly issued Atol receipt, will they have a legal case against the agent who issued it? If so, this could redefine the risk profile of the whole agency sector.
After the failure of Goldtrail the CAA was looking for technicalities that enabled it to reject claims for compensation, particularly those originating from the large online retailers. It was thinking in terms of travel agents making a claim, not consumers. As such this notice takes us a step further away from full consumer protection.
I often say that the CAA Consumer Protection Group should be renamed the ATTF Protection Group. This is another step in the ‘protect the ATTF at all costs’ attitude that pervades every aspect of consumer protection.
True Atol reform would give us a regulator who warmly embraces consumer claims, whereas the current regulator finds every possible way to palm the cost off onto someone else – trade associations, credit card companies and now agents.
If you look at the detail of the notice, it highlights the problems that arise where agents “mark up”. Flight only operators (and cruise operators) pay a pittance of commission – how can you sell the product and make such low commission as an agent?
You can’t. You have to add a booking fee, credit card charge or whatever to make a turn, and often Atol receipts are not clear on this. The ATTF will only reimburse the customer the gross operator price and not any add-ons.

Reaction to the March 2011 budget

Mark Caldicott — Thu, 24 Mar 2011 19:35:05 +0000

See below for my initial reaction to the Chancellors speech and budget for 2011:-

http://www.travelweekly.co.uk/Articles/2011/03/23/36598/budget-2011-backing-for-small-businesses-welcomed.html

For a more detailed analysis of the individual taxation changes and implications view a copy of our budget summary below:-

The Spring Budget 2011 Report

OTAs selling no-frills flights can ‘sidestep’ ATOL reforms

Chris Photi — Fri, 04 Feb 2011 17:09:27 +0000

“One small step for man, one giant leap for mankind”? Yesterday’s Atol reform announcement by the aviation minister was little more than a baby step albeit in the right direction.

She has gone for a quick fix through secondary legislation with the promise of a review of primary legislation next year. What is proposed? All flights sold plus ground arrangements can no longer be structured to fall outside of the Atol protection scheme by split contracting.

However, even though tougher policing is threatened, there is still a massive loophole for Online Travel Agents to continue to act as an agent for the consumer in booking a no frills flight on their behalf direct with an airline and selling the ground arrangement separately.

Broadly the profile mix of an OTA selling flight-plus, due to the paucity of chartered flight availability, is weighted 75% towards no frills. While the proposal seeks travel agents to provide greater clarity to consumers, I believe it to be still very simple for a carefully constructed website to sidestep this reform.

However there are some significant sensible aspects that will come out in the small print of the baby step:

• The CAA is to implement the ATOL Protection Certificate – hopefully an unequivocal kite mark of security – a great progression;

• Travel agents will still be able to sell travel components in an agency capacity and be scored by the CAA for free asset testing at the lower risk profile of agency turnover. The CAA, judging from the high level debate I have had with their senior officers, promise a thoughtful and pragmatic approach while remaining, for the sake of fairness, within their published financial and fitness criteria. However, the potential increased enforcement and compliance powers the minister refers to still concern this old and, some may say, jaundiced licensing professional.

Immediate problems I foresee:

• The lack of transparent and trustworthy Supplier Failure Insurance cover – the CAA will score a business without SFI as a higher licensing risk;

• The smouldering resentment by the Big Two who have not got the level playing field they wanted with airlines. Supposing they play the “well, actually, we are an airline too” card and pull their direct business out of the Atol scheme;

• Where will the CAA’s double bonding come from for new entrants into the Atol scheme;

• Also, watch out for a proliferation of trust-related protection within the Atol scheme to negate bonding requirements.

Finally, a plea. Will all stakeholders actually make sure you respond to the formal consultation and have your informed say.

Am I the only one fed up with big industry names righteously calling the industry to arms and to do something about it when they can’t be bothered to formally respond to the consultation when invited to do so.

Stop plugging product in the name of rousing the industry.

Boardroom Ready

Nikki Spoor — Thu, 01 Jul 2010 09:35:25 +0000

Sometimes Managers and Owners have a poor financial planning of growing businesses. They do not understand the value of financial forecasting, key performance indicator, or even what their financials tell them about their company. On 29th June 2010 I was co-presenter of a presentation to senior women executives in the travel industry dealing with these issues. The feedback was great and hopefully left the attendees more enlightened as to how a greater understanding of these financial issues could lead to implementation of better planning and growth of a business. For further information please see following link: http://www.awte.org.uk/content/news.html#financial_10

Emmergency Summer Budget 2010

Mark Caldicott — Wed, 23 Jun 2010 18:39:54 +0000

We all knew the ‘Emergency’ Summer Budget was likely to be tough – given the dire state of the public finances the Chancellor believed there was no other option. But what did it mean exactly for businesses, entrepreneurs, employees and families? The attached Budget Summary provides details of the key changes announced and the tables of the main rates and allowances.

The Summer Budget 2010 Report

Travel Republic Appeal

Chris Photi — Thu, 20 May 2010 13:16:34 +0000

Using the analogy of Premiership football when it comes to the CAA and court hearings and appeals, the CAA would be Portsmouth! How many times can you go to court in less than five years and lose? How much tax payers money has been spent in fighting what from the outset always appeared losing causes? Presumably given the latest ruling they will also be paying the defendant’s costs too!!

I was a presenter at the ABTA/Law Society annual seminar two years ago when one of the lawyers there reviewed the Travel Republic terms and conditions on screen. Afterwards I canvassed all of the travel lawyers present and could not find one of them that thought Travel Republic were contravening the ATOL regulations. Sometimes entities will drag around their interpretation of the law until they find someone that will give them the answer they want to hear!

Nevertheless I do believe the CAA acted in good faith and were attempting to regulate within the confines of the remit given to them by Government. The CAA have not been dealt a good hand by Government I am afraid and are now protecting and regulating seriously flawed and out of date legislation. Rather than conducting a stream of appeals the CAA should be concentrating their efforts on “Flight Plus” and changes in legislation which make the ATOL regulations clear and unequivocal and that provide meaningful Consumer Protection.

Where to from here? One desperately hopes the CAA will call an end to this and will not refer the matter to The Supreme Court. It is my understanding that this would not be straightforward for them to do anyway. A fair implementation of the “Flight Plus” proposals, factoring in thoughtful and telling responses from the trade and allowing time for companies that have not broken the law, such as Travel Republic, to meet fair and consistent financial criteria and regulation, has to be the way forward.