I’m trying not to make this an advertorial, but I am excited. This month I have been looking at how many of my clients use their payment technology, and how it can be supercharged and answer some of the problems operators have with the transparency of the movement of OPM (other people’s money such as passenger fares) through their business. achieving greater transparency in VAT management while ensuring the smooth flow of funds for both operators and drivers.
In the ever-changing landscape of the transportation industry, payment systems have become an integral part of how passengers pay for their fares. However, as an accountant, I was wondering how this technology can be utilised to help my clients evolve their VAT obligations and produce more accurate and better-formed accounts that are easily understandable by the tax authorities (HMRC).
Payment systems are now widely used by operator6, but not necessarily as dispersal systems. This offers numerous advantages for both operators and drivers. These systems enable the secure storage of funds in the cloud, allowing operators to demonstrate proper money movement and produce accounts that reflect accurate financial transactions. One of the key benefits is the ability to receive direct payments from virtually all UK banks, streamlining the payment process and reducing administrative burdens.
These systems prioritise the guarantee of clients’ money, by leveraging Open Banking protocols, transactions are authorised without storing any banking or personal details. This eliminates the risk associated with storing sensitive information.
Speed is another significant. As an online checkout solution, these systems offer a fast and convenient way for customers to pay their fares. With bank transfers, customers can send funds directly from their bank accounts to the business account, eliminating the need for card details or data entry. This expedites the payment process, allowing operators to receive funds quickly and efficiently.
The utilisation of secure Open Banking protocols is instrumental in creating a seamless payment experience. By generating a secure payment request link, operators can offer multiple channels for payment, such as SMS, email, WhatsApp, QR codes, or online platforms. These flexible options cater to the diverse preferences of passengers, enhancing convenience and accessibility. Moreover, the elimination of card readers or lengthy numbers to type in simplifies the payment process and reduces potential errors.
However, from a VAT perspective, payment systems offer several advantages that contribute to enhanced transparency and streamlined accounting. By allowing fares income to be processed outside of the VAT environment, operators can present accounts that accurately depict the movement of money. This transparency is beneficial for both the operators and HMRC, as it promotes clear financial reporting and simplifies the VAT assessment process. Furthermore, operators can leverage the advantages of payment systems to optimise their VAT position.
The benefits extend beyond the confines of operator businesses. They also provide drivers with a reliable method for holding funds in the cloud, drivers can effectively manage their finances, accessing the necessary funds when needed whilst maintaining transparency and traceability. This ensures that drivers can operate within the UK tax environment without undue complications.
In conclusion, payment systems have not just revolutionised the way transactions are conducted, but as an accountant, we can leverage this technology to help our clients evolve their VAT obligations and produce accounts which more readily reflect their trading, so that the HMRC can see what is their money and what is drivers money, and which one attracts VAT.
By embracing these payment systems, operators can enhance financial reporting, simplify VAT assessments, and optimise their VAT position. Simultaneously, drivers can benefit from the streamlined flow of funds while maintaining compliance with the tax authorities. The widespread adoption of payment systems in the transportation sector will lead to a better journey for operators and their accountants in explaining how they work to the tax authorities.
There, got that out of my system. You will be hearing more about this as I delve deeper into this and I will of course share the results as I go on, both good and bad. All down to embracing tech folks!!
This article was originally written for Professional Driver Magazine.
