Agency members of Accredited Bodies won’t enjoy the full 50% rebate on payments of the £2.50 Atol Protection Charge (APC) as the UK tax office will take 20%.
The CAA confirmed the £1.25-per-booking ‘refund’ will be subject to VAT since it will be invoiced as a “service charge”.
CAA head of Atol Andy Cohen told Travel Weekly: “It is taxable because of the way it’s set up.”
The 20% VAT rate means agents stand to lose 21p per booking to HM Revenue & Customs. However, they should also enjoy a windfall as the ‘service charge’ payments will be backdated to May 2014.
The Office for National Statistics, which produces the UK’s national accounts, reclassified the APC as a tax in 2014 as part of a general reclassification of payments that businesses are required to make to government bodies, including regulators. The APC goes to the Air Travel
Trust to financially protect consumers. Industry figures warned at the time this could lead to tax office interest in the payments.
Martin Alcock, director of The Travel Trade Consultancy, estimates HMRC could pocket up to £200,000 of the backdated repayments. He said: “HMRC has started putting its hand in the APC till.”
The CAA confirmed last week that the trust will repay 50% of the APC on protected bookings made through Accredited Bodies (Travel Weekly, August 20).
The arrangement applies to more than 1,300 members of Advantage Travel Partnership, Barrhead Travel Services, Broadway Travel Services, Freedom Travel Group, Global Travel Group, Hays Travel, the Midcounties Co-operative and Travel Counsellors.
Accredited Bodies were introduced in 2012 and the CAA has required they have trust accounts since May 2014.
Trustee arrangements may cost an Accredited Body up to £100,000 a year, and Cohen said the repayments recognised that this was a “significant cost”.