It’s a common misconception that a travel company trust account is just for small or start up businesses. But actually, the travel trust account option of complying with the financial protection requirements for consumers’ forward payments under the Package Travel Regulations 1992 and the ATOL Regulations 2012 is becoming increasingly favoured by larger travel companies as a means of providing a flexible, secure and simple means of financial protection.
The days of expensive bonding and unreliable insurance policies could be numbered as the Civil Aviation Authority can be seen to increasingly favour the travel trust account route. They have already enforced this as an option for consumer protection by the country’s Accredited Bodies and have been seen to encourage the larger online travel agents into considering it as an option. This is because they view it as a ‘safe’ option, without its susceptibility to overtrading and insurance policy exclusions. Trust account monies are held transparently and accessibly, and in the case of a travel trust account used to facilitate an ATOL, are held on trust for the trustees of the Air Travel Trust.
The recently decided Court of Appeal decision in relation to HMRC’s investigation into Med Hotels’ liability to pay tax under the Tour Operator’s Margin Scheme has encouraged trust accounts further into favour. The decision suggested that once a travel company has complied with general principles of agency law in the sale of travel products (as they are outlined in the decision), and they are also holding consumer payments in a trust account, then this would be irrefutable evidence that the company was acting as an agent in the transaction, and should not therefore be paying TOMS.
Damon Wright, director of VAT services for travel at MacIntyre Hudson said at a recent travel and leisure seminar that the use of trust accounts, in conjunction with other measures, could demonstrate agency status:
‘When the court was deciding whether Med was acting as an agent, one of the first things it looked at was whether money had been held in a trust account, as it is not liable for TOMS. A lot of businesses should be thinking about the use of a trust account as it gives you the maximum defence. If the Medhotels decision is upheld it would make it very difficult for HMRC to say you’re acting as an agent in your own name.’
A Serenity trust can lend itself to any structure, large or small. It is a bare bones account, which utilises the extensive skills and experience of travel specialist lawyers as trustees. We work with our clients using the flexibility that is needed to integrate our trustee role with your cash flow and payment processing needs.