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Reporting to the Civil Aviation Authority on escrow accounts

Author: ICAEW Insights

Published: 23 Aug 2021

The UK Civil Aviation Authority (the CAA) has issued a statement clarifying that there is currently no requirement to provide an Accountant’s Report in support of an escrow account.

The CAA’s Air Travel Organiser’s Licence (ATOL) scheme protects some 20 million holidaymakers each year. Its purpose is to protect the public from losing money or being stranded abroad because the travel provider that they have booked to travel with fails. ATOL licences are valid for a period of no more than one year, and ATOL holders are required to report periodically to the CAA on data relevant to the ATOL licence. Part of the renewal process involves obtaining reports by ATOL Reporting Accountants on certain financial information of the provider.

At the time of the March 2021 renewal of ATOL licenses, Michael Budge, Head of ATOL Licensing at the CAA, noted that “[The CAA] has continued to focus on ensuring the appropriate protection of advance customer monies and requiring ATOL holders to maintain adequate liquidity to meet future obligations. Where appropriate, certain conditions were required to meet these obligations.”

Along these lines, in the recent ATOL reform consultation issued by the CAA, one of the options being considered is the use of escrow accounts for ATOL holders, for the separation of customer monies, as a means of providing financial security. There are currently a few escrow accounts in operation with ATOL holders.

With respect to requirements for reporting accountants, the CAA has now issued the following clarification on its web page for the ATOL Reporting Accountants’ Scheme:

Until such time as the CAA has agreed a structured work programme with the CAA approved professional accountancy bodies, there is no requirement to provide an Accountant’s Report in support of an escrow account.

ICAEW’s Audit and Assurance Faculty will continue to monitor developments with the assistance of specialists from its ATOL Reporting working group. The CAA will work with the approved professional accountancy bodies, including ICAEW, in the short term to develop and agree the work programme for accountants reporting on escrow accounts.

The CAA’s statement following March 2021 renewals also thanked travel companies for submitting their renewal applications and supporting information in good time, and highlighted the importance of those businesses renewing their ATOL licenses by 30 September 2021 to apply in good time to allow sufficient time to meet any required licence conditions. 

ICAEW’s Audit and Assurance Faculty’s technical release, TECH 02/20 AAF ATOL Reporting Accountants - Reporting to the Civil Aviation Authority sets out good practice guidance for ATOL Reporting Accountants reporting on information that is required to support ATOL holder’s licence renewals, and is available here.

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