p18 city mar20 17/3/09 18:04 Page 18
City & finance
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PricewaterhouseCoopers is warning that travel agents’ accounting practices may not be keeping up
with the regulations – and could mean they risk liability for backdated payments. Chris Gray reports
ACCOUNT FILING.
Agents risk wrath
Account errors
of Inland Revenue
‘could be costly’
AGENTS face a minefield in filing accounts
because there are no set rules when to account
PRICEWATERHOUSECOOPERS has warned that the company was at risk of airline failure in the as a principal or agent – but getting it wrong could
the introduction last year of the £1 levy has left eyes of the CAA. mean they face years of backdated VAT payments.
agents at risk of falling foul of the Inland Previously, agents were absolved from PwC’s Russell Glass said it was up to company
Revenue and accountancy authorities in the way responsibility for airline failure by “deeds of directors or auditors to decide what side of the
they file company accounts. undertaking” provided by airlines, but all such fence their business was on, but many independ-
The accountancy giant said many agents deeds were cancelled when APC came into force. ent agencies used small auditing firms that might
might have “unwittingly crossed the line” from That meant agents could now be deemed to not be aware of all the technicalities.
being an agent to a principal for accounting be bearing the majority of risks and rewards, Glass said it was crucial they got it right
purposes since the £1 APC levy replaced bonding putting themselves in the same position as a tour because if the agency was officially a principal it
in April last year. operator – meaning they should state they were could became liable for VAT payments under the
It issued the warning after analysing the principals in their accounts, said Glass. Tour Operators’ Margin Scheme (Toms), as the
accounts of the 128 biggest Atol holders and “There could be more travel agents that Inland Revenue would look at accounting as a
finding 27% described themselves purely as should account for some of their sales as a principal as evidence of being liable for Toms.
agents, 55% purely as operators, and 18% as principal,” he said. “The revenue could then go back for three years
both agents and operators. “They are putting themselves in danger of not and make an assessment of the Toms liability for
The number of Atol holders describing preparing the accounts in accordance with the that period with interest and fines,” he said.
themselves as agents was “surprising”, said accounting rules and the tax rules.” Accounting as a principal also meant an
Russell Glass, a senior manager in PwC’s Travel agency had to include the full price of all
and Tourism group, who wrote the report. products sold in turnover, not just commission,
Accounting as an agent meant the company meaning the turnover could soar by about 90%.
did not bear the bulk of the “risks and rewards” That could mean the agency would have to
of a sale, said Glass, but holding an Atol meant file full, rather than abbreviated accounts, if its
turnover rose above £5.6 million as a result.
Make-up of Atol holders
How the 128 largest Atol holders described
themselves in accounts up to April 1, 2008 BUSINESS RISK.
55%
Atol holders miss
airline danger
ONLY 9% of the Atol holders analysed by
27%
PwC disclosed they were at risk of airline fail-
18%
ure in company accounts even though all of
them were.
Directors are required under the Companies
Act to state their “principal risks and uncertain-
ties” in a business section in their accounts.
But PwC found 91% did not, and of the 9% that
Travel agent
did, half were part of First Choice.
Travel agent and tour operator
Tour operator Source: PwC
Glass said he expected that number to rise as
more agents sold flights and packages and the
economic downturn continued through 2009.
18 20.03.2009
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