ATOL Reporting, Trust Accounts, and CAA Financial Tests: A 2025-26 Guide

CAA reporting standards and trust-account rules are tightening. Understand ATOL financial tests, liquidity ratios, and audit requirements for UK travel agents. Antravia UK explains how to stay compliant and audit-ready.

Introduction

As we move into 2025-26, the UK travel industry faces evolving regulatory demands from the Civil Aviation Authority (CAA). With recent updates to ATOL (Air Travel Organiser's Licence) reporting and ongoing reforms to financial protection mechanisms, travel agents and tour operators must prioritize compliance to avoid penalties, licence issues, or operational disruptions. These changes, driven by lessons from past failures like Thomas Cook and the pandemic's impact, aim to enhance consumer protection while supporting business resilience. This guide breaks down key areas, such as ATOL reporting, trust accounts, CAA financial tests, liquidity ratios, and audit requirements, for UK businesses holding or applying for an ATOL. We'll cover the latest rules effective in 2025 and practical steps to stay audit-ready.

Understanding ATOL: The Basics

ATOL is a statutory licensing scheme managed by the CAA, designed to protect consumers booking flight-inclusive packages. It ensures that if a travel company fails, customers can complete their holidays or receive refunds without cost to the taxpayer. All UK businesses selling air holiday packages or flight-plus arrangements must hold an ATOL, with options including Small Business ATOL (SBA) for up to 500 passengers and £1m revenue, Standard ATOL for larger operations, or Franchise ATOL for those operating under a franchisor. The scheme is funded partly through ATOL Protection Contributions (APCs), paid by licence holders per passenger. In 2025, with over 934 licences renewed as of October, the focus is on stricter reporting and financial scrutiny to mitigate risks.

ATOL Reporting Requirements: What's New in 2025-26

ATOL holders must submit regular reports to demonstrate compliance and financial health. Core elements include APC Returns (detailing passenger numbers and contributions) and the Annual Accountants' Report (AAR), which verifies financial data.

Starting January 2025, the CAA has mandated enhanced forward bookings breakdowns in APC Returns to improve risk monitoring:

• Monthly Standard ATOL Reporters: From the period ending 31 January 2025, provide a monthly breakdown of forward passenger bookings for the next 12 months, plus totals for month 13 onward.

• Quarterly Standard ATOL Reporters: From the quarter ending 30 June 2025, include a quarterly breakdown for the next 12 months, plus totals beyond.

• Quarterly SBA Reporters: From 30 June 2025, report total forward passenger bookings post-reporting period.

These changes apply to Part C of the ATOL report, focusing on forward departures, and require updates to systems for accurate data capture. For renewals, applications after 30 June 2025 must include APC Returns up to that date for quarterly reporters. Larger holders (£5m+ turnover) submit monthly reports, while others are quarterly. Failure to stay current can block renewals, so integrate reporting into your finance workflows.

Trust Accounts: Safeguarding Client Funds

Under the Package Travel Regulations 2018 (PTR), trust accounts are a key method for insolvency protection, holding client monies separately until the package is fulfilled or refunded. For ATOL holders, all funds for protected trips should be in a CAA-approved trust account, managed by an independent trustee with travel expertise and professional indemnity insurance. This ensures independence, as no business access, and traceability per booking.

Key rules include:

• Funds held in the UK or EU, identified as trust assets.

• Daily reconciliation for transparency and fraud prevention as required

• Combination with insurance for repatriation in transport-inclusive packages.

• In insolvency, funds prioritize fulfilment, with trustees like those at Protected Trust Services enabling seamless continuation.

Benefits for UK travel agents: Enhanced merchant services access, multi-currency support, and lower costs than bonds. The Air Travel Trust (ATT), funded by APCs, backs the system by covering failures when operator protections fall short. With 2025 reforms exploring flexible mixes (e.g., trust + bonding), review your setup to align with CAA approvals.

CAA Financial Tests: Ratios and Liquidity Focus

The CAA assesses ATOL holders using financial ratios from latest statements to gauge viability and risk. Tests vary by licence type:

• Small Business ATOL (SBA): Basic ratios—current (assets/liabilities), cash (cash/liabilities), leverage (liabilities/assets), return on assets (profit/assets).

• Standard/Franchise ATOL (>1,000 passengers): Adds EBITDA margin (EBITDA/revenue), revenue growth (current/prior revenue), and variance (actual/projected revenue).

Liquidity is central, measured by current and cash ratios to ensure short-term obligations can be met. Holders over £20m may face monthly monitoring and risk-based reviews; smaller ones may too if risks arise. New applicants need £30,000 minimum paid-up capital, with bonds starting at £50,000. Use the ATOL Self-Assessment Tool (ASAT) for pre-checks, if failing, inject cash or adjust projections.

No major ratio changes for 2025-26, but ongoing ATOL reform may introduce risk-adjusted APCs and flexible protections.

Audit Requirements: Ensuring Accuracy

Audits underpin trust in reporting. Standard ATOL holders submit audited financial statements via the AAR, prepared by a CAA-approved ATOL Reporting Accountant (ARA). The AAR has two parts: Part 1 (APC verification) and Part 2 (financial review), submitted during renewals. ARAs improve standards through CAA training.

For 2025-26, note broader UK audit threshold changes (for example, for companies with £50m+ company thresholds), but ATOL-specific audits may remain mandatory. Renewals require the latest four quarters' data; submit by 1 August 2025 for reduced fees. To prepare, maintain accurate records and engage ARAs early.

Staying Compliant and Audit-Ready: Practical Tips

• Monitor Finances Proactively: Regularly calculate ratios and use ASAT to flag issues. Improve liquidity by managing debts and boosting income.

• Update Systems for Reporting: Integrate software for forward bookings breakdowns to meet 2025 changes.

• Choose the Right Protection: Opt for trust accounts with approved trustees for efficiency; combine with SFI for supplier payments.

• Prepare for Renewals: Submit early (March/September cycles), with full financials and AAR. If renewing in 2026, factor in 2025 data.

• Seek Expert Advice: Consult ARAs or consultants for assessments; review DfT/CAA consultations for emerging reforms.

By staying ahead, UK travel businesses can navigate these rules, reduce risks, and focus on growth.

Conclusion

The 2025-26 landscape emphasizes resilience through tighter reporting, robust trust accounts, and rigorous financial tests. For tailored support, contact Antravia UK or visit the CAA website for resources. Stay informed as ATOL reforms evolve.

References - ATOL Reporting, Trust Accounts, and CAA Financial Tests: A 2025-26 Survival Guide

• UK Civil Aviation Authority (CAA) – ATOL Official Guidance
  www.caa.co.uk/atol

• CAA – ATOL Reporting Accountants (ARA) Scheme & Annual Accountants’ Report (AAR) Requirements
  www.caa.co.uk/atol/financial-reports/ara-scheme

• CAA – ATOL Standard Terms and ATOL Licence Holder Obligations
  www.caa.co.uk/atol/standard-terms

• CAA – Consultation and Policy Updates on ATOL Reform (Trust Accounts, Risk-Based APCs, Financial Protection Models)
  www.caa.co.uk/consultations

• CAA – ATOL Renewal Statistics and Market Reports
  www.caa.co.uk/atol/statistics

• Department for Transport (DfT) – ATOL Reform & Package Travel Regulations Policy Papers
  www.gov.uk/government/organisations/department-for-transport

• Package Travel and Linked Travel Arrangements Regulations 2018 (Statutory Instrument)
  www.legislation.gov.uk/uksi/2018/634

• Companies House – Audit Exemption Criteria and Company Size Thresholds (2025 Amendments)
  www.gov.uk/guidance/annual-accounts

• UK Government – Insolvency Protection Guidance for Travel Organisers
  www.gov.uk/guidance/package-holidays-business-responsibilities

• Air Travel Trust (ATT) – Financial Protection Framework
  www.caa.co.uk/atol/att

Disclaimer

This article is provided for general information purposes only and does not constitute accounting, tax, or legal advice. Regulations, tax rules, and reporting requirements may change, and their application can vary depending on your business structure and circumstances. Readers should seek professional guidance from a qualified accountant or adviser before making any financial, tax, or compliance decisions. Antravia UK accepts no responsibility for any loss arising from reliance on the information contained herein.