The ATOL reporting rules changed on 1 July
The new EU Directive, (EU) 2015/2302, on package travel and linked travel arrangements (PTD) has led to changes to the ATOL regulations; the Official Record Series 3 (ORS3), which sets out the ATOL standard terms for ATOL holders; and, as an appendix of that document, the requirements for ATOL Reporting Accountants. ORS3 is made under the ATOL Regulations and most of its provisions have the force of law.
The Civil Aviation (ATOL) (Amendment) Regulations 2018 need to be read in conjunction with the Civil Aviation (Air Travel Organisers’ Licensing) Regulations 2012.
The implementation of the relevant parts of PTD took effect on 1 July 2018. ATOL holders need to make changes to their reporting and ATOL reporting accountants (ARAs) need to understand those changes when reporting to the CAA on ATOL holders.
Small business ATOLs (SBAs) now report to the CAA on a quarterly basis (previously annual), bringing them in line with other ATOL holders.
For SBAs, the AAR Part 1 (Annual Accountants Report to the CAA), on the number of licensable passengers (both on a booking date basis and departure date basis) and the corresponding revenue (departure date basis only) will now be on a quarterly basis, too.
The CAA uses the signed AAR Part 1 to confirm an ATOL holder has traded within its limits and that the correct level of ATOL protection contribution (APC) has been paid to the Air Travel Trust, although an SBA will continue to pay APC annually with no change to the APC period covered.
Another AAR change is that a franchise ATOL holder with less than £5m licensable revenue and more than 1,000 passengers will need to provide an AAR Part 2, but this does not need to be signed by an ARA unless notified by the CAA. Therefore, where applicable, an ARA needs to confirm with the ATOL holder if the CAA has requested an ARA signed AAR Part 2.
The timescale for providing the AARs for all ATOL holders and ARAs has changed from ‘within six months’ to ‘within nine months’ of the ATOL holder’s financial period end or its ATOL renewal date, whichever is the earlier.
An ARA must understand what and how an ATOL holder client is reporting licensable and non-licensable sales. An ARA must understand what constitutes a package to be able to review how the licensable sales are managed and measured and to provide an AAR Part 1.
‘Package’ is as defined in the ATOL regulations. The full definition is copied in the ‘Requirements for ATOL Reporting Accountants - Guidance Note 10’, page 27/28. As an example, the opening sentence describes ‘a combination of at least two different types of travel service for the purpose of the same trip or holiday’, albeit where the consumer has one or more contracts.
ATOL licensable packages are now defined as single-contract or multi-contract packages, ie the consumer has either one contract for all their travel services that are part of the package, or they have more than one contract for all their travel services that together are part of the package.
The old category of flight-plus does not exist anymore (from 1 July) and no further bookings for this category can be taken. Going forward, these types of sales will be included as packages by way of a multi-contract package and will be ATOL protected as a package. Therefore, an ATOL holder’s business systems must be able to distinguish between licensable and non-licensable, including the package types, ie single or multi contracts. An ARA must also be able to identify a package in either capacity of contract, and what is not a package but which may be protected as a flight-only sale.
There are amendments to what is and what isn’t an ATOL sale. There are also amendments to the exemptions from the ATOL Regulations (Reg.11) that should be considered when reviewing sales.
Unless a flight-only is made by an airline or an airline-appointed agent, then by default the sales are ATOL protected. However, there are two amended exemptions that may apply:
The ATOL holder must state clearly on all invoices and receipts that the sale is not protected under the ATOL scheme. ARAs need to review and understand the exemption (02/2018 – Flight-Only ticket fully paid exemption in ORS3 – page 13), as they may need to test it against sales data where applicable, to ensure it is being correctly applied and that transactions are correctly reported by ATOL holders. However, overarching this is the fact that if the sale is part of a package then it is not exempt.
Other changes relate to the sale of flight accommodation by an ATOL holder being made available in the EEA (other than the UK) and where adverts for sales are on websites operated by a third party. More detail on this can be found in ATOL Standard Term 6 – Sales Restrictions.
The CAA has included a transitional period for reporting, which an ARA will need to understand when completing an AAR Part 1. Where there are flight-plus passengers booked prior to 1 July (ie before the cessation of the category of sale) who have not yet departed, then the ATOL holder must report these under multi-contract packages until the last of those passengers have departed.
Going forward, an ATOL holder’s licence categories will be amended at the time of their next applicable licence renewal to include flight-plus as multi-contract package sales. In addition, the CAA will not require an ATOL holder’s authorisations (licensable revenue licence Limits) to be varied to make this change until their next renewal, unless an ATOL holder itself identifies that under the new definition of packages their licensable business has expanded above their limits when they add together their current licensed packages and the flight-plus sales. Hence the need to understand the definition of a package as defined in the ATOL Regulations.
This is a summary of ATOL Regulation changes and an ARA should review the ‘Requirements for ATOL Reporting Accountants – GN10’ in Appendix A of the CAA ORS3 for the full details.