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Minimise the impact of the abolition of the small business ATOL by using a travel trust account

In June 2014, the CAA began a consultation process which detailed proposals to discontinue the availability of the Small Business ATOL (SBA) from April 2015. The proposed changes will also affect any current ATOL holder with licensable turnover of below £5 million. But changes may not be so marked if a travel trust account is utilised as a means of providing consumer financial protection.

The CAA’s proposals as they stand at June 2014 will mean that existing Small Business ATOL holders will have the option to either take a full (Standard) ATOL and be subject to a full financial assessment, or become a member of an Accredited Body or ATOL franchise.

The financial assessment will be based on a minimum of 500,000 rather than the current 500 seats. The minimum bond, at 15%, will be £75,000 and will reduce to 12.5% and 10% in subsequent years. New ratios will be required in respect of profits, liquidity and cash flow and solvency. The minimum share capital requirement will be £50,000 (currently there is no minimum), there will also be a requirement for an asset turnover ratio.

It’s currently not clear whether these requirements will apply to those applicants that choose the travel trust account option rather than travel bonding. Minimum seat requirements will obviously remain a criteria, but minimum bond requirements will not apply, and common sense would suggest that the profit, liquidity, cash flow and solvency ratios will take on less importance if all consumer funds are ring fenced in a properly operated trust account.

The consultation process is due to close by the end of October 2014. We will write again with an update after that.

To view the full CAA consultation document click here:

http://www.caa.co.uk/docs/33/CAP%201190%20Rebalancing%20ATOL.pdf