Unless your licence is exempt, the Civil Aviation Authority (CAA) tests the finances of an Air Travel Organiser's Licence (ATOL) holder using figures from its latest accounts, and the Annual Accountants' Report that carries those figures must be signed by an ATOL Reporting Accountant. That is an accountant designated through one of six approved accountancy bodies. Your bookkeeping decides what the figures say; the reporting accountant confirms them.
This guide explains what the report contains, who can sign it, which ratios the CAA looks at and what you can do months before renewal so the numbers hold up.
What is the ATOL Annual Accountants' Report?
It is a set of confirmations by an accountant that you complete as a term of holding an ATOL. It comes in two parts:
- Part 1 is the accountant's confirmation of licensable passengers booked, passengers carried and revenue, on a departure date basis. For a Standard ATOL it covers your last four complete quarters before your most recent financial year end. For a Small Business ATOL it covers your last complete licensable period.
- Part 2 is the accountant's confirmation of figures from your accounts, using your most recent financial year end.
Not every licence needs both parts. Joint ABTA-ATOL licences, for example, do not need Part 2. The checklist that comes with your renewal application tells you which forms you need.
Who can sign it?
The CAA's rule is short: all ATOL reporting needs to be signed by an ATOL Reporting Accountant, known as an ARA. ARAs are designated through six approved bodies: the Association of Chartered Certified Accountants (ACCA), the Association of International Accountants (AIA), the Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Chartered Accountants in Ireland (ICAI), the Institute of Chartered Accountants of Scotland (ICAS) and the Institute of Financial Accountants (IFA).
Your auditor does not have to be your ARA, although the same person can be both.
To be clear about our own position: Zmartly does not act as an ATOL Reporting Accountant, so you need a designated reporting accountant to sign the report. What we do is the work underneath it: the bookkeeping, the year-end accounts and the VAT records the report is prepared from.
Which financial ratios does the CAA look at?
The CAA calculates a set of ratios from your latest financial statements. How many depends on your licence:
- Standard ATOLs, and franchise members above 1,000 passengers, are assessed on seven: current ratio, cash ratio, leverage, return on assets, EBITDA margin (earnings before interest, tax, depreciation and amortisation, as a share of revenue), revenue growth and revenue variance.
- Small Business ATOLs are assessed on the first four only: current ratio, cash ratio, leverage and return on assets.
The first four are simple divisions:
- Current ratio: current assets divided by current liabilities.
- Cash ratio: cash divided by current liabilities.
- Leverage: total liabilities divided by total assets.
- Return on assets: net profit divided by total assets.
Every one of those inputs comes from your balance sheet or profit and loss account. That is why the quality of your year-end accounts matters as much as the result.
Why your bookkeeping changes the ratios
Travel businesses take money long before the trip happens. Under normal accounting, money a customer has paid for travel that has not yet taken place is not income yet. Under accruals accounting it sits in your accounts as deferred income, a liability, until the travel is provided. Record it as sales when it arrives and your profit looks better than it is, while your liabilities look smaller than they are.
Supplier payments work the other way. A deposit you have paid a hotel for next summer is an asset until the stay happens. Errors on either side distort your profit and your ratios; which ratios move depends on which balances are wrong.
VAT feeds in too. If you sell packages under the Tour Operators' Margin Scheme (TOMS), the year-end calculation can change the VAT you owe, and that liability belongs in the same accounts. Our guide to how TOMS works, with a worked year-end calculation covers that side.
What else does the CAA set for new and smaller licence holders?
- New applicants need minimum paid-up share capital of £30,000. Small Business ATOL holders who held that status on 31 May 2016 are not normally required to meet it while they keep it.
- The minimum bond for new applicants is £50,000, reducing to £20,000 over four years.
- A Small Business ATOL is limited to 500 passengers and £1 million of revenue a year.
- Franchise members with an ATOL limit of 1,000 passengers or fewer are not usually assessed by the CAA and do not need to send it financial statements, although the franchise may run its own assessment.
- Start-ups are assessed on projected figures, and the CAA may ask for more cash to be put in.
Renewals are normally assessed in March or September, and the CAA encourages holders to submit as early as possible.
What to do before renewal
- Agree your year end with the renewal cycle in mind, so your accounts are ready when the CAA wants them.
- Keep customer money for future travel separate in the books from income already earned.
- Reconcile your booking system to the bank every month, not once a year.
- Ask your ATOL Reporting Accountant early which figures they will need, and in what form.
- If you use TOMS, finish the year-end calculation straight after your year end so the VAT figure in the accounts is the real one.
If you want the accounts and VAT underneath your ATOL report kept straight all year, that is what our travel agency accountants do for agents, tour operators and destination management companies.
Frequently asked questions
Can any accountant sign the ATOL Annual Accountants' Report?
No. All ATOL reporting needs to be signed by an ATOL Reporting Accountant designated through one of the six bodies the CAA approves.
Does my auditor have to be my ATOL Reporting Accountant?
No. The registered auditor does not need to be the ARA, although the same person can be both.
Which ratios apply to a Small Business ATOL?
Four: the current ratio, the cash ratio, leverage and return on assets. Standard ATOLs are also assessed on EBITDA margin, revenue growth and revenue variance.
Does Zmartly sign ATOL reports?
No. We do not act as an ATOL Reporting Accountant. We keep the books, prepare the year-end accounts and run the VAT, including TOMS, that the report is prepared from.
Sources
The ATOL reporting requirements and financial criteria in this article were checked against these CAA pages on 13 November 2026. The TOMS points follow our TOMS guide, checked against HMRC's VAT Notice 709/5.
