CAA decision on Rebalancing ATOL: Small Business ATOL retained

CAA decision on Rebalancing ATOL: Small Business ATOL retained

13-Mar-2015 Source: CAA

The CAA has confirmed it will retain the Small Business ATOL in a modified form and will introduce a number of other measures to ensure all ATOL holders meet a proportionate level of financial resilience.

In its response to the “Rebalancing ATOL” consultation the CAA has set out a series of key decisions, which also include improved financial reporting arrangements.

In reaching these decisions the CAA has taken into account the 167 responses it received from travel firms, travel industry associations and other interested parties, as part of the consultation paper issued in June 2014.

The original proposals set out to ensure all ATOL holders passed a financial test and to extend the risk based approach to licensing, which already applies to larger ATOL holders. The aim was to reduce the likelihood that consumers of ATOL protected holidays would be affected by insolvency.

There was a broad acceptance that all ATOL holders should be subject to financial vetting, however some responses suggested the proposals could be unaffordable for smaller businesses and create barriers to entry in the market

In response the CAA has decided to retain the SBA licence in a modified form, with the following features:

• All SBA holders will still have a 500 passenger limitation.
• All SBA holders will have to meet a basic solvency test.
• All SBAs will be limited to no more than £1million of ATOL turnover per annum. Firms which exceed this limit will need to become standard ATOL holders.
• All new SBA applicants will be required to have paid up share capital of £30,000.
• All new SBA applicants will be required to provide a minimum bond of £50,000.

In addition, all new standard ATOL applicants will be required to provide a minimum bond of £50,000. All these changes will come into effect on 1 October 2015.

The CAA will also be proceeding with three other proposals from the consultation.

First, all ATOL holders with licensable revenue of between £1million and £5million will be subject to a new and more sophisticated financial test. This test will allow the CAA to ensure that firms have sufficient financial resources. The details of the test will be announced in May and they will be introduced from 1 October, 2015.

Secondly, all accountants reporting on ATOL holders must demonstrate their competence to sign off on ATOL reports to their professional accountancy body. The CAA has worked with all accountancy bodies involved with ATOL reporting and this requirement will become effective from 1 October, 2015.

Thirdly, the CAA will continue to develop the ATOL online self-service facility which will allow ATOL holders and their reporting accountants to submit licence applications and financial reports online.

Andy Cohen, Head of ATOL at the CAA, said: “We received a useful response from the travel trade to our original consultation and we’ve taken on board the concerns expressed, along with advice from the CAA’s Consumer Panel.

“We now have now arrived at a package of measures where genuinely small businesses can continue to utilise the SBA category, but where no business can offer ATOL protection without having gone through a financial test proportionate to their size.

“This rebalancing of the ATOL licensing arrangements means the CAA will be carrying out financial checks on all ATOL holders appropriate to their size; this will enable us to reassure holidaymakers that financial checks have taken place and the likelihood of detriment and inconvenience is reduced.

“We believe that this will help to increase consumer confidence in the ATOL.”

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