Regulatory trusts and escrows
ATOL trusts
If you sell flight-inclusive packages, you must have an ATOL in place to trade legally.
For the Civil Aviation Authority (CAA) to grant you an ATOL, you have to financially protect your customers’ money. You may be asked to hold your customer’s money in a trust account or set up a dormant “trigger trust”, which would operate if your business triggered some specified covenant or condition.
ATOL escrow
In 2021, we started to see the Civil Aviation Authority (CAA) allowing businesses to put ATOL escrow accounts in place, offering an alternative to traditional ATOL trust accounts. Escrow accounts have several differences in the way they function.
Under an ATOL escrow account, you must maintain a specified percentage of your client’s money in a separate escrow account. The CAA will determine the percentage.
Customers’ funds would be collected into your normal trading bank. Each week, you adjust the escrow account balance to ensure it meets the agreed calculation.
Choosing the right option for your business
Selecting between an ATOL escrow and an ATOL trust depends on various factors specific to your business, including:
- Average flight cost
- Availability of airline failure insurance
- Proportion sold through travel agents
- Timing and value of deposits and supplier payments
Making an informed choice is essential to ensure regulatory compliance and financial stability for your travel business.
Non-licensable
Trust accounts are one of the accepted methods for consumer protection under the Package Travel Regulations (PTRs). You may use a trust account to protect your customers’ money for non-flight packages or to satisfy the conditions of ABTA membership.