Outrigger Hotels and Resorts

Published on Wednesday, March 2, 2016

ATOL holders to be subject to new financial checks

The CAA is to introduce new financial assessments for all existing and new standard and small business ATOL holders from June 1.

It said the changes will ensure that all ATOL holders are subject to 'robust financial tests' and are designed to extend the CAA's risk-based approach to licensing.

The CAA said this would reduce the assessment burden for firms licensed for between £5 million and £20 million.

There will not be any change for large ATOL holders with revenues of more than £20 million.

The new assessments comprise a set of financial ratios - four for small businesses and seven for standard ATOL holders - that are weighted and then combined to produce an overall assessment of the company's financial position, based on data taken from its year-end accounts.

This will inform the CAA's licensing decisions, it said.

To help travel companies prepare for the changes, the CAA has a new online self-assessment tool, which can be completed in advance of their application and submitted to the CAA, which will then indicate whether they have met the financial test.

Head of ATOL Andy Cohen said:  "The existing tests have been in place for more than 30 years and needed updating to reflect modern risk-based methods for financially assessing the likelihood of business failure.

"In bringing in these changes, our primary objective, is to reduce the risk of travel company failure and the subsequent impact and disruption to passengers.

"The new financial assessments will mean we are better placed to properly identify, in advance, those companies that are in, or at risk of financial trouble, improving the outcome for consumers."

The CAA said it understood that some businesses not previously subject to a financial assessment may be concerned about the new test.

Cohen added: "If an existing ATOL holder would like to know whether they meet the new criteria, ahead of their renewal, they can send us a self-assessment form online. 

"We will review the information submitted and then tell the ATOL holder whether they would pass the new assessment or what improvement(s) are required in order to pass. We will be communicating with ATOL holders about how to do this."

Commenting on the changes, travel accountants Elman Wall said that the introduction of a new £1 million turnover limit for Small Business ATOL holders meant they would need careful financial planning when they needed to trade up to a Standard ATOL.

However, the accountants agreed that the changes should lead to a reduction in the assessment burden for standard ATOL holders, except those deemed to be high risk.

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