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Background

The DMCC has been a long time coming – the Act was first introduced to the UK parliament on 25 April 2023, following a Green Paper back in 2018 and a consultation in 2021.

The overall aim of the Act is to protect consumers by strengthening the enforcement of consumer protection law (including by giving the Competition & Markets Authority (“CMA”) significant new powers and the prospect of GDPR style fines) and introducing new consumer rights. Indeed, as the CMA noted in its 2024/25 Annual Plan, the DMCC Act will “place consumer protection law on a par with competition law”. The Act was finalised during the ‘wash-up’ preceding the 2024 General Election and received Royal Assent on 24 May 2024.

Our view is that this really is a landmark piece of legislation that has the potential to affect businesses across a wide variety of sectors, obviously including our own.

Key Points

As already mentioned, this is not a travel specific piece of legislation. That being said, there are plenty of aspects, which have at least one eye on our sector or can be seen as likely having a direct impact dependent upon your business model. Whilst there is a lot to get into, here are a flavour of the key points to know and consider:

• On timescales – there is going to be a phased implementation over the next 18 months (it is December 2024 at the time of writing), starting with the rules on enforcement and unfair trading coming into force in 2025; enforcement of financial penalties will be April 2025; and the subscriptions rules in the spring of 2026 “at the earliest”.
• A new department within the CMA is being created – the ‘Digital Markets Unit’ – who are tasked with promoting fair, digital markets and ensuring the most powerful tech firms treat consumers and business fairly.
• A core aspect of the Act is to expand the CMA’s existing investigation and enforcement powers in respect of competition issues. More on that later;
• The DMCC is, to a degree, re-stating previous laws in this area and strengthening them. It is another consumer focused piece of legislation;
• There is an attempt to crack down on the long running issue of fake reviews of any kind – own or third party.
• Another general issue being tackled by the DMCC that has relevance to travel and leisure is that of drip pricing – i.e. where only part of an end price is displayed at the outset, and then the final, total amount is revealed at or near the end of the transaction. However, there was some surprise that the new rules will not apply to “optional fees”, which effectively means that many of the commonly cited examples drip pricing such as airline seat reservation fees will not come in scope.
• Coming back to the enforcement point, the DMCC greatly enhances the CMA’s existing powers. To a degree the main change here is that up to now the CMA has had to instigate formal court proceedings to enforce any breaches of consumer protection law it perceives to have occurred. Usually that is after a period of correspondence and discussion with the relevant business. Under the new regime, the CMA will be able to seek Undertakings after their investigations and after any issue final enforcement notice. The affected business will still have the power to challenge such action – but now it is they that must start Court action to do so.
• The CMA will also have the power to impose fines, the potential for which is really quite notable. They can be up to £300,000 or 10% of annual global turnover (whichever is higher) in relation to final infringement notices, with various other fines available in some other circumstances.

Summary & Practical Steps

This really is a notable change that travel businesses need to think about irrespective of size or shape. Not every aspect of the DMCC will affect all businesses, but the potential ramifications for getting caught out is there. Over the years Travlaw have acted for all kinds of businesses – ranging from top ATOL holders right down to smaller SMEs – with approaches and enforcement action from the CMA. The whole change to the “burden of proof” could prove to be a game changer – the resources needed to challenge the CMA could prove to be simply too much for many businesses to justify, leading to acquiesce where that is neither right, fair nor reasonable. At the other end of the scale larger businesses could see significant actions brought against them which whilst ostensibly they have the resources to challenge will nevertheless not welcome and could be huge burdens to deal with.

One practical step now is to conduct a review of your businesses practices in respect of any and all of the above points that the DMCC will cover. Only you can say how reliant you are on, say, reviews, or whether there is any potential for drip pricing to be a factor. The good news is that performing such a review should not only identify areas that can be improved upon but is in itself a piece of potential due diligence for the business and its Directors.

On that last note – there is little about exactly how individuals may fall under the scope of fining powers, but again this is a situation better avoided entirely by making sure that the overall business does not come under any kind of investigation by having a robust and commercially well thought through set of processes in place.

Travlaw are a niche law firm who for more than two decades have been relied upon by the travel & leisure industry on legal, regulatory and compliance matters. See www.Travlaw.co.uk for more on their services and the thought leadership they have to offer.

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Labour Government fiscally focused on rebuilding Britain

Ahead of much apprehension, Chancellor Rachel Reeves delivered the new Labour Government’s Autumn Budget today, which was focused on the government’s long-term goal of stabilising the country’s economy by boosting economic growth whilst reducing a reliance on borrowing.

The Chancellor assured the plan was not to squeeze the average workers’ pay, and there were no outlined increases to employee NIC, income tax thresholds nor VAT. Despite this, businesses will be adjusting to the headline announcement that employers’ NIC rate increases by 1.2% to 15% from April 2025, and the threshold decreased at which NIC becomes payable will fall steeply to £5,000 from £9,100. Nestled within these changes is the rise in April 2025 of the national minimum wage, which will increase to £12.21 per hour. Stability was granted with the corporation tax rate remaining at 25%. On a positive note, the government has decided to preserve the R&D reliefs presently in place. Added to this, other tax reliefs were introduced such as film and high-end TV companies being able to claim additional tax relief on their UK visual effects costs from 1st April 2025.

In terms of NIC and income tax thresholds, Chancellor Reeves outlined the commitment to extend the five-year freeze put in place by her predecessor until 2029. This means these thresholds will increase in line with wages increasing, not inflation.

A factor for many UK businesses will be the business rates — existing 40% on business rates for the retail, hospitality and leisure industries will continue in 2025/26, capped at £110,000 per business.

As part of this fiscal plan, some prominent tax increases were announced — some of which there will be time to prepare for, and others whose impact is rather immediate. For example, the Chancellor announced the government will increase the stamp duty land surcharge for second homes by 2% to 5% — effective from today.

A consideration for the travel industry will be the increase on air passenger duty, introducing an increase of no more than £2 for an economy-class short haul flight. However, on private jets, there is an increase on the rate of air passenger duty by a further 50% — equivalent to £450 per passenger for a private jet.

Amongst the hikes, there were tax freezes. The Chancellor extended the inheritance tax threshold freeze for a further two years to 2030. That means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants, and £1m when a tax-free allowance is passed to a surviving spouse or civil partner. However, inherited pensions will be moved under the umbrella of inheritance tax from April 2027. Chancellor Reeves granted a freeze on fuel tax for the next year, which may benefit businesses reliant on transportation of services and goods.

Interestingly, HM Revenue & Customs will have investment injected into their organisation to modernise their systems and employ more compliance officers.

The points above provide merely a snapshot of the fiscal announcements — the Budget announcements were extensive and wide-reaching, many of which may have an impact on your financial outlook. Therefore, WHA have prepared a summary of all the announcements and adjusted thresholds for you to use as a resource. To access this WHA 2024 Autumn Budget summary, please click on the thumbnail image below:

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Capital Gains Tax (CGT)

Prime minister Sir Keir Starmer calmed some nerves among homeowners by ruling out charging CGT on primary residences.   However, it’s likely that CGT rates generally could be raised or reliefs removed to bolster the Treasury coffers.

One thing seems certain; there won’t be any increase in reliefs or decrease in rates as Chancellor of the Exchequer Rachel Reeves has repeatedly talked about the ‘black hole’ in the finances being larger than expected.

Media outlets have said Reeves is considering increasing CGT rates to match those on income tax. The highest rate of CGT is 24% on non-business assets, compared to the top rate of income tax of 45%.

Applying the 45% rate to all types of assets is likely to be at odds with Labour’s claim to want to encourage wealth creation, so business assets may continue to be taxed at a reduced rate.  Currently, under Business Asset Disposal Relief, unquoted shares that are part of a personal trading company attract a much lower CGT rate of 10% on gains of up to £1m.

Meanwhile, second homes and holiday-let properties could be seen by Labour as an easy target for further rate rises as, in the current climate, there is unlikely to be much sympathy for people who own multiple properties.

In their meetings with top investment managers, Labour has suggested that any tax rises announced in October would not be applied until the beginning of the next tax year, from April 6, 2025.  This ‘grace period’ may lead to a quick injection of cash for the government as taxpayers rush to sell property and pay the lower rate of CGT.

However, this is by no means guaranteed and we are currently working with clients to ensure that all clearances for share buy backs, sales of company shares, solvent liquidations, property sales, employee share schemes, EIS share assurances, reorganisations and capital distributions are on track to complete before the budget.

It is advisable that clients review with their financial advisors any listed investments, property portfolios or share portfolios to assess whether any sales should be accelerated to guarantee paying the current rate of CGT.

Inheritance Tax (IHT)

IHT is hated by many, as it is seen as a tax on money that has already been taxed.  However, it is an area that could be targeted as it affects less than 4% of estates and is another tax that is often viewed as only affecting the very wealthy.

Currently, the IHT rate is 40% on anything over £325,000 in your estate.  It has remained unchanged since 2009, so many more people have been affected as property prices have risen.  There is also an additional exemption of up to £175,000 for the sale of your private residence, if the full estate is worth £2m or less.

Other suggested targets are Business Property Relief (BPR) and Agricultural Property Relief (APR), which allows people to pass on family firms or farms, in some cases free of IHT. This allows continuity of business and removing the reliefs will have a significant impact.

The laws on gifting to avoid IHT could also be changed.  Gifts to individuals are tax-free if you survive for at least seven years after making the gift and are a popular way for wealthy individuals to pass on assets, while they are relatively young and in good health.  If you don’t survive 7 years, tax is due on a sliding scale, depending on the date of death; someone who dies 6 years after gifting will attract an IHT of 8%, while passing on within three years of gifting will leave the recipient with a 40% bill.   Labour may consider increasing some of the rates or scrapping the 7-year rule altogether.

It is advisable that anyone planning any gifts or transfer of shares to family members accelerates the process to ensure they qualify for relief under the current legislation.

Pension Tax Relief (PTR)

Sir Keir has already pledged that the lifetime limit on the amount you can build up in a pensions savings pot without triggering a tax charge, previously set at £1.073m and removed by the Conservatives, will not be re-instated.

However, a two-stage pension review has already been launched by the Chancellor and she could also announce changes to pension tax relief.

Currently, savings to a pension pot get tax relief at source on contribution, depending upon the rate of income tax paid.  Basic rate taxpayers get 20% relief, while higher rate and additional rate taxpayers are entitled to 40% and 45% relief respectively.  It’s possible that the higher and additional rate tax relief bands could be scrapped and limited to 20%.  Alternatively, some studies have suggested Reeves’ preference is for a flat rate of 30% for everyone.

Meanwhile, the pension ‘carry forward’ rule could be amended or reduced.  Currently you can pay £60,000 per year into a pension before incurring tax and the rule allows you to take advantage of any unused annual allowances from the previous three years, provided earnings are at least equal to the amount you are contributing.

Tax relief for company contributions to an employee pension scheme operate differently in that they obtain corporation tax relief on gross contributions made as part of trading expenses.  The employee’s annual income and annual relief are still taken into account, so where possible it may be worth accelerating the contributions for the tax year 2024/2025 to secure certain tax relief under current legislation, in addition to utilising the ‘carry forward’ rule if applicable.

The other area of pension tax under scrutiny is the tax-free lump sum, where you can take up to 25% of your pension tax-free, up to a maximum of £268,275.  Some who fear this may be scrapped or reduced are planning to secure the 25% earlier than planned, before the budget, with the aim of re-investing it if the lump sum is not affected.

It is likely that something will happen to pension taxation and we advise clients to discuss their options with their financial advisors and the implications of any new action.

Corporation Tax (CT)

Labour is keen to be seen to be on the side of business and Reeves has stated there will be no increase to the 25% rate, hence there has been little discussion on CT.

There may be a cut on the rate but as Reeves has been quiet on this area it is difficult to plan for any eventuality regarding CT.

Summary

I’ve summarised the current pertinent talking points but without a crystal ball or perhaps the intervention of Derren Brown, it’s impossible to know what will happen.  It’s never wise to plan based on what might happen as historically there have been some left-field changes that few anticipated.  However, if there is anything within your control that you wish to change or a planned event in the future, it is worth considering the timing of your actions.

White Hart Associates are specialist accountants for the travel industry.  Visit whitehartassociates.com or contact 0208 878 8383 for more information.

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Last month, we proudly sponsored the Best Workplaces in Travel Awards for the second year running. This year, we were the sponsor for the Mid-Sized Company Award. Julie Jones, our Development Director, attended the event and presented the award. We were thrilled to see so many T&G clients and partners in the room.

Sponsoring the Best Workplaces in Travel Awards for the second consecutive year is an honour for us. At T&G, we are proud to be the UK’s authorized insurer, specifically formed to offer bonding by insurance to the travel industry. Our travel bonds support more tour operators and travel agents than any other insurer, with over 700 travel clients choosing our financial protection products, including bonding and Financial Failure Insurance, every year.

As a mid-sized company, we understand and share many of the challenges that others in this category face. Before the pandemic, we prided ourselves on having higher-than-average length of service levels. However, like many of you, we had to make several redundancies during the pandemic.

From those challenges, we have emerged stronger and more resilient. We have been actively rebuilding our team and attracting new talent. One of the things we are particularly proud of is our commitment to diversity, equity, and inclusion. Today, over 58% of our workforce are women, and we are continually striving to create an even more inclusive workplace.

On the night of June 10th, we celebrated the exceptional workplaces in the travel industry and recognized the importance of fostering environments where employees can thrive.

And the winner for the mid-sized company award was……… Ice Lolly

Find out more – BWIT 2024 – Insights and Awards

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The general election has been announced for July 4^th and depending on which party is elected to form the next government, the landscape of employment law and workers’ rights could change.
As employers in the travel industry, it is important to understand what changes the main political parties propose to make, specifically to employment law in the UK. The purpose of this article is to set out just that (as far as we can at this stage) based on the election campaigns – not to advance one parties proposals over another.

What changes would Labour winning the 2024 general election make to UK Employment Law?

Labour winning the general election in 2024 would likely result in more extensive protection for workers’ rights in the United Kingdom, providing that Labour manage to implement all, or most, of the plans as laid out on their website;

• • Employee’s rights would expand, as all in the workforce would be defined as workers instead of either an employee or a worker. Currently, employees have more extensive rights, like statutory sick pay, statutory maternity and paternity pay, right to not be unfairly dismissed, etc. If the proposals were implemented, all workers would be entitled to these rights.
  • Claims for unfair dismissal would be a day one right available to workers, rather than the current law (where employees must work for 2 years before being entitled to claim unfair dismissal).
  • A large part of Labour’s employment law proposal covers increased wages to combat the current cost-of-living crisis.  The National Minimum Wage would be increased with every worker, aged 18 or over, being entitled to the National Living Wage. Currently, 18 year-olds are entitled to nearly £3 less than 21+ year olds, so this gap would be reduced/removed. This would obviously impact the cost of wages for businesses, if their workforce contains the age group.
  • Labour also propose to support businesses to strengthen jobs whilst working with workers to negotiate a higher pay with Fair Pay Agreements that establish a minimum standardized T&Cs.
  • Further, they aim to make flexible working a right to all workers where it is possible and reasonable. Currently employees can only make a request to work flexibly0 as opposed to work flexibly.
  • Introducing a “right to disconnect” from work for workers, following other European countries.
  • Banning the practice of “fire and rehire”.
  • Increasing the time limit to bring Employment Tribunal Claims to six months, currently the time limit is three months for most types of claims.
  • Expanding the gender pay reporting requirements to also cover disability and ethnic pay gaps. In addition extending the right to claim equal pay to black, Asian, ethnic minority and disabled employees.

What would the Conservatives do if they remain in power?
There is little comment from the Conservative party and their proposals surrounding employment at this juncture, although any proposals are likely to compliment the aim of “smarter regulation to grow the economy” that the aim will be deregulatory.
This might look like;

• • • A re introduction of Employment Tribunal Fees.
    • Possible cap on non-compete clauses.
    • Reforms to TUPE to simplify.
    • Abolition of European Works Councils.
    • Enhanced Paternity Leave to fathers whose partner dies in childbirth.
    • Redefine “sex” under the Equality Act to mean “biological sex”.
    • Getting people with health conditions back to work is a priority for the current government, so backing up recent proposals regarding changes to disability benefits could feature among the Conservative party’s election pledges

We’ll be able to examine the parties’ intentions once they release their Manifesto. We will bring more details of what they’re proposing as they emerge.

For help and advice on employment issues within the travel industry, contact ami@travlaw.co.uk
or call 0113 258 0033

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