A former Travel Counsellors agent facing a £13,000 tax bill is confident agents have a strong case to challenge claims from HM Revenue & Customs.
Jack Leaf, who left Travel Counsellors last November to set up Destiny Travel, says he is “surprised” counsellors’ eligibility for the VAT Flat Rate Scheme is being challenged.
HMRC claims Travel Counsellors exerts a “dominant influence” over its agents, making them ineligible for a 10.5% VAT rate, instead of the standard 20%, and liable for back payments for up to four years.
But Leaf, who heard about the scheme through fellow counsellors before joining in 2012, disputed this. “Travel Counsellors refrained from giving financial or accounting advice,” he said. “Certainly they did not dominate in that way.
“Being dominant implies the success of my business depended on them. If so, how have I been able to leave, with all my clients, and work elsewhere?”
VAT-registered firms apply to join the Flat Rate Scheme, which allows them to pay a reduced rate, but not reclaim the tax on purchases.
Leaf said he “panicked” when he received an HMRC Compliance Check letter on June 6 giving him just three weeks to respond.
However, he said a date of September 2 had now been agreed to allow further consultation.
“The letter arrived without warning so I got straight on to my accountant,” he said. “I’ve no idea what triggered it.”
Leaf, who contacted Travel Weekly after we revealed the HMRC dispute last week, said: “If the ruling is we were not eligible, I will swallow it. Nonetheless, it’s concerning that someone can come along and say money you’ve put aside for your future is not yours.”
Travel Counsellors said last week it could not comment on an issue relating to individual agents’ businesses but it was providing support.