Schedule of Professional Services - Civil Aviation Authority (CAA) Ara-Atol Reports


The following are the CAA pre-agreed terms of engagement of ATOL Reporting Accountants by ATOL holders to prepare reports required by the CAA in connection with the ATOL holder’s obligations under the Civil Aviation (Air Travel Organisers' Licensing) Regulations 2012 and the Civil Aviation (Contributions to the Air Travel Trust) Regulations 2007 (as amended).

These CAA Standard ARA-ATOL Terms of engagement do not cover any reports requested by CAA in connection with lapsed licences and the release of bonds, sub-ordinated loans, guarantees and redemption of preference shares.

These terms must be included, unamended, with the wider terms of engagement between the ATOL holder and the ATOL Reporting Accountant. However, none of the wider terms may contradict or purport to contradict these terms and the ATOL holder and the ATOL Reporting Accountant agree that any that purport to do so will be void.

A contract between an ATOL holder, its ATOL Reporting Accountants, the CAA on its own behalf and as agent for the Trustees of the Air Travel Trust on these terms is formed when the air travel ATOL holder and the ATOL Reporting Accountant sign and submit to the CAA a Report as set out in Clause 3 herein.

In these terms of engagement:

“CAA” refers to the Civil Aviation Authority;

“Accountable Person” refers to the ATOL holder’s director with authority to ensure the ATOL holder complies with the terms and conditions of its ATOL acceptable to the CAA (pursuant to ATOL Regulation 32);

“ARA” refers to ATOL Reporting Accountant;

“ATT” refers to the Air Travel Trust;

“the ATOL holder” refers to the air travel organiser that is required to submit a Report to the CAA;

“the Accountants” refers to the ATOL holder’s ATOL Reporting Accountant as defined in the ATOL Standard Term 3, published in the CAA’s Official Record Series 3, pursuant to ATOL Regulation 40(1);

“Guidance Note 10” refers to the publication by the CAA of the Requirements for ATOL Reporting Accountants dated March 2016 in Official Record Series 3.

1. INTRODUCTION

The ATOL holder is required to submit to the CAA Reports as set out in Clause 3 below that are signed by their Accountants to provide independent assurance or factual confirmations on the information provided. These CAA Standard ARA-ATOL Terms of Engagement set out the basis on which the Accountants will sign the Report.

2. THE ATOL HOLDER’S RESPONSIBILITIES

2.1 The ATOL holder is responsible for producing the information set out in the Reports, maintaining proper records complying with the terms of the CAA’s ATOL Standard Terms and providing relevant financial information to the CAA on a monthly, quarterly and annual basis in accordance with the requirements of the ATOL Standard Terms. The ATOL holder is responsible for ensuring that the non-financial records are reconcilable to the financial records.

2.2 The ATOL holder’s Accountable Person will ensure that all records, correspondence, information and explanations that the Accountants consider necessary to enable the Accountants to perform the Accountants’ work are made available to the Accountants.

2.3 The ATOL holder, the CAA and the ATT accept that the ability of the Accountants to perform their work effectively depends upon the ATOL holder providing full and free access to the financial and other records and the ATOL holder shall procure that any such records held by a third party are made available to the Accountants.

2.4 The Accountants accept that, whether or not the ATOL holder meets its obligations, the Accountants remain under an obligation to the CAA and the ATT to perform their work with reasonable care. The failure by the ATOL holder to meet its obligations may cause the Accountants to qualify their report or be unable to provide a report.

3. SCOPE OF THE ACCOUNTANTS’ WORK

3.1 The ATOL holder will provide the Accountants with such information, explanations and documentation that the Accountants consider necessary to carry out their responsibilities. The Accountants will seek written representations from management in relation to matters for which independent corroboration is not available. The Accountants will also seek confirmation that any significant matters of which the Accountants should be aware have been brought to the Accountants’ attention.

3.2 The Accountants will perform the following work in relation to the Reports required by the CAA (where applicable). The following reports will be required for each category of ATOL holder and Accountants should amend the terms of reference for each engagement accordingly:

a) Standard ATOL holders - 3.2.1 to 3.2.4 above;
b) SBAs – 3.2.1 to 3.2.4 above;
c) Trade licences – 3.2.2 but departure date basis only and 3.2.3above;
d) Franchise Member ATOL holders ≥ £5m ATOL revenue – 3.2.1 to 3.2.3 above;
e) Franchise Member ATOL holders < £5m ATOL revenue – no reporting required;
f) Other Reports outlined under 3.2.5 and 3.2.6 will only be requested in specific circumstances.

3.2.1 Annual Accountants’ Report (Part 1): Licensable Revenue on a departure date basis: The Accountants will perform such procedures as are necessary, for forming an opinion as to whether the Licensable Revenue, on both an annual and 4 calendar quarters basis disclosed in section 1 of Part 1 of the Annual Accountants’ Report has been fairly presented in accordance with CAA Regulations and Guidance and subject to any adverse findings will produce a report in the form as detailed in Guidance Note 10.

3.2.2 Annual Accountants’ Report (Part 1): Licensable passenger numbers on a booking date and departure date basis: The Accountants will perform the work procedures set out in Annex 7 of Guidance Note 10 on both an annual and 4 calendar quarters basis and subject to any adverse findings will produce a report in the form as detailed in Guidance Note 10. UK Civil Aviation Authority ATOL Guidance Note 10.

3.2.3 Annual Accountants’ Report (Part 2): Extraction of information from the ATOL holder’s Financial Statements: The Accountants will perform the work procedures set out in the Annex 7 of Guidance Note and subject to any adverse findings will produce a report as detailed in Guidance Note 10.

3.2.4 Airline Ticket Agent Report: The Accountants will perform the work procedures set out in Annex 7 of Guidance Note 10 and subject to any adverse findings will produce a report as detailed in Guidance Note 10.

3.2.5 Factual Confirmations Report: The Accountants will perform the work procedures set out in Annex 8 of Guidance Note 10 on request by the CAA to the ATOL holder for an accountants’ confirmation report and subject to any adverse findings will produce a Factual Confirmations report in the form set out in Annex 8 of Guidance Note 10.

3.2.6 Ring Fencing Report: The Accountants will perform the work procedures set out in Annex 9 of Guidance Note 10 on request by the CAA to the ATOL holder for an accountants’ ring fencing report and subject to any adverse findings will produce a Ring Fencing report in the form set out in Annex 9 of Guidance Note 10.

3.2.7 The Accountants will not subject the information provided by the ATOL holder to checking or verification except to the extent expressly stated. While the Accountants will perform their work with reasonable skill and care and will report any misstatements, frauds or errors that are revealed by enquiries within the scope of the engagement, the Accountants’ work should not be relied upon to disclose all misstatements, fraud or errors that might exist.

4. FORM OF THE ACCOUNTANTS’ REPORTS

4.1 The Accountants’ Reports are prepared on the following bases:

4.1.1 The Accountants’ Reports are prepared solely for the confidential use of the ATOL holder and the CAA and solely for the purpose of submission to the CAA in connection with the CAA’s requirements in connection with the ATOL holder’s Air Travel Organiser’s Licence. They may not be relied upon by the ATOL holder or the CAA for any other purpose except as provided in 4.1.2 below;

4.1.2 The CAA may disclose the Reports to the ATT in connection with any actual or potential liability to the ATT that may arise out of the business conducted by the ATOL holder, and the ATT will be entitled to rely on them subject to the terms of this agreement. The ATT may share the Accountants’ Reports and/or the information contained in the Accountants’ Reports with;

• the ATT’s insurers in connection with making an insurance claim, where required by the ATT obligations under its contract of insurance; and
• the ATT’s own statutory auditors and legal advisors;

and the Accountants do not object to such disclosure provided that the ATT’s insurers and the ATT’s own statutory auditors and legal advisors agree for the benefit of the Accountants (and the CAA produces evidence of such agreement if and when requested by the Accountants) that:

a) the Reports prepared by the Accountants are designed to meet the agreed requirements of the CAA, the ATT and the ATOL holder only;

b) the Reports are not to be regarded as suitable to be used or relied on by any party wishing to acquire any rights against the Accountants other than the CAA, the ATT and the ATOL holder in accordance with this agreement; UK Civil Aviation Authority ATOL Guidance Note 10

c) the Accountants do not assume any responsibility in respect of their work performed for the CAA, the ATT and the ATOL holder or the Reports, or any judgments, conclusions, opinions, or findings that the Accountants may have formed or made, to any party except the CAA, the ATT and the ATOL holder in accordance with this agreement;

d) to the fullest extent permitted by law the Accountants accept no liability in respect of any such matters to any party except the CAA, the ATT and the ATOL holder in accordance with this agreement;

e) should any party except the CAA, the ATT or the ATOL holder choose to rely on the work performed by the Accountants or the Reports, that party will do so at its own risk; and that

f) the Reports are to remain confidential in the hands of the ATT’s insurers and the ATT’s own statutory auditors and legal advisors.

4.1.3 Neither the ATOL holder, the CAA nor the ATT may rely on any oral or draft reports the Accountants provide. The Accountants accept responsibility to the ATOL holder, the CAA and the ATT for the Accountants’ final signed reports only;

4.1.4 Except as provided for in clause 4.1.2 above and clause 4.1.5 below, the Accountants’ Reports must not be recited or referred to in whole or in part in any other document (including, without limitation, any publication issued by the CAA);

4.1.5 Subject to clause 4.1.2 above and except to the extent required by court order, law or regulation or to assist in the resolution of any court proceedings, the Accountants’ Reports must not be made available, copied or recited to any other person (including, without limitation, any person who may use or refer to any of the CAA’s publications);

4.1.6 The Accountants, their partners and staff neither owe nor accept any duty to any person other than the ATOL holder, the CAA or the ATT in accordance with this agreement (including, without limitation, any person who may use or refer to any of the CAA’s Publications) and shall not be liable for any loss, damage or expense of whatsoever nature which is caused by their reliance on representations in the Accountants’ Reports.

5. RIGHTS AND DUTIES OF THE ACCOUNTANTS

5.1.1. An ATOL holder recognises that, if during the course of preparing an Accountants’ report the Accountants become aware of breaches of the ATOL Regulations by the ATOL holder, the Accountants are required to report them directly to the Civil Aviation Authority, in accordance with the terms of their designation as an ARA and as set out in more detail in Guidance Note 10.
5.1.2. The Accountants may make that report without prior reference to the ATOL holder.

5.1.3. To the extent necessary to enable the Accountants to comply with this requirement, the ATOL holder waives the right of confidentiality. This waiver extends to any report made, document produced or information disclosed to the Civil Aviation Authority in good faith pursuant to these instructions, even though it may subsequently transpire that the Accountants were mistaken in their belief that there was cause for concern.

6. LIABILITY PROVISIONS

6.1. The Accountants will perform the engagement with reasonable skill and care and acknowledge that they will be liable to the ATOL holder, the CAA and the ATT for losses, damages, costs or expenses (“losses”) caused by their breach of contract, negligence, or dishonesty or fraud or other deliberate breach of duty, subject to the following provisions:

6.1.1 The Accountants will not be so liable if such losses are due to the provision of false, misleading or incomplete information or documentation or due to the acts or omissions of any person other than the Accountants, except where, on the basis of the enquiries normally undertaken by Accountants within the scope set out in these CAA Standard ARA-ATOL Terms of Engagement, it would have been reasonable for the Accountants to discover such defects;

6.1.2 The Accountants accept liability without limit for the consequences of their own fraud and for any other liability which it is not permitted by law to limit or exclude;

6.1.3 Subject to the previous clause (6.1.2), the total aggregate liability of the Accountants whether in contract, tort (including negligence) or otherwise, to the CAA, the ATT and the ATOL holder, for any losses suffered by the CAA, the ATT, or the ATOL holder arising from or in connection with the work which is the subject of these terms (including any addition or variation to the work), shall not exceed an amount to be agreed between the parties by separate written agreement or, in the absence of such agreement, calculated in accordance with the CAA’s capping formula published in Guidance Note 10 (“the Liability Cap”);

The Guidance Note 10, issued March 2016, is available on the CAA’s website: http://www.caa.co.uk/ATOL-protection/Trade/Licensing-forms-and-bonds/Licensing-forms-and-bonds/.

Individual firms of accountants need to consider whether or not to accept the CAA’s offered capping formula or negotiate a liability cap with the CAA by separate agreement. Such consideration will take into account, inter alia, whether the limitation is appropriate to the scope of the engagement, the fees generated, their assessment of risks in undertaking the work and their internal risk management policies. Where firms consider that they are unable to accept the formula, they may wish to negotiate their own individual capping arrangements with the CAA.

In accepting an Accountants report prepared under an engagement in these terms the CAA and the ATT and the ATOL holder agree that the Liability Cap will be shared between them and that their respective claims against the Accountant shall be dealt with in accordance with the following priority. In the event of successful claims against the Accountants by more than one of the CAA, the ATT and the ATOL holder, the CAA and the ATT shall be entitled to recover their loss in priority to the ATOL holder subject always to the maximum Liability Cap. The Accountants shall notify the CAA if a claim is commenced by the ATOL holder against the Accountants but the Accountants are not party to the separately agreed priority set out in the preceding sentence. Nothing in this clause will affect the validity or operation of clause 6.1.5 below;

6.1.4 The Accountants’ liability arising after the application of the other provisions of this clause 6 (above and below) shall in aggregate be limited to that proportion of the total losses, after taking into account contributory negligence (if any), which is just and equitable having regard to the extent of the responsibility of the Accountants for the losses, and the extent of responsibility of any other person (“Other Person”);

In order to calculate the proportionate share of the Accountants’ liability, no account shall be taken of any matter affecting the possibility of recovering compensation from any Other Person, including the Other Person having ceased to exist, having ceased to be liable, having an agreed limit on its liability or for other reasons being unable to pay, and full account shall be taken of the Other Person’s responsibility even if that Other Person is not a party or witness to any relevant proceedings;

6.1.5 The allocation of the Liability Cap between the CAA, the ATT and the ATOL holder shall be entirely a matter for the CAA, the ATT and the ATOL holder, who will be under no obligation to inform the Accountant of it. If (for whatever reason) no such allocation is agreed, none of the CAA, the ATT and the ATOL holder will dispute the validity, enforceability or operation of the Liability Cap on the grounds that no such allocation is agreed.

6.2 This clause 6.2 shall not apply to any claim that might be brought against the Accountants separately by the ATOL holder. The CAA and the ATT agree that neither the CAA nor the ATT will bring any legal proceedings against the Accountants arising out of or in connection with this agreement or the services to be provided thereunder unless the ATT has suffered a loss as a result of the Accountants' breach of contract or their negligence arising from the provision of the services and:

(i) a failure of the ATOL holder has occurred (A failure of the ATOL holder will occur if an authorised signatory of the CAA has signed a Notice of ATOL holder failure in respect of that ATOL holder and has placed a copy of that Notice on the CAA's Register of Failed ATOL holders.);

(ii) the loss to the Air Travel Trust (ATT) exceeds 15% of the ATOL holder's Public revenue Licence Limit, or the total of the actual bond (if a bond was provided by the ATOL holder as a specific condition of its ATOL), whichever is the greater; and

(iii) the CAA and/or the ATT have taken reasonable steps (Reasonable steps are either: the institution of legal proceedings where it is consistent with the ATT fiduciary duties and/or the CAA function and duties; or formal claim in any insolvency.) to recover the loss from the ATOL holder or any guarantees provided to the CAA or the ATT by the principals of the ATOL holder or any other appropriate third parties. In the event that such conditions are satisfied, the CAA and the ATT further agree that the Accountants' liability shall, subject always to the Liability Cap referred to in clause 6.1.3 above, be limited to that proportion of the ATT loss that is in excess of 15% of the ATOL holder's Public revenue Licence Limit or actual bond (if a bond was provided by the ATOL holder as a specific condition of its ATOL), whichever is the greater. Please see footnotes 5 and 6 below for definitions in respect of failure of the ATOL holder and reasonable steps. In the event that conditions (i) and (iii) are satisfied but condition (ii) is not, such that the loss to the ATT does not exceed the 15% threshold stated in (ii) and there is no bond, the Accountants’ liability to the ATT and/or to the CAA shall be limited (on the basis stated above) to £250,000.

6.3 The ATOL holder, the CAA and the ATT agree that they will not bring any claims or proceedings against any individual partners, members, directors or employees of the Accountants. This clause is intended to benefit such partners, members, directors and employees who may enforce this clause pursuant to the Contracts (Rights of Third Parties) Act 1999 (the “Act”). Notwithstanding any benefits or rights conferred by this agreement on any third party by virtue of the Act, the parties to this agreement may agree to vary or rescind this agreement without any third party’s consent. Other than as expressly provided in these terms, the Act is excluded.

6.4 Any claims, whether in contract, negligence or otherwise, must be formally commenced within two years after the party bringing the claim becomes aware (or ought reasonably to have become aware) of the facts which give rise to the action and in any event no later than four years after any alleged breach of contract, negligence or other cause of action. This expressly overrides any statutory provision which would otherwise apply. In the event that the CAA and/or the ATT delay commencing a claim against the Accountants in order to comply with their obligations under clause 6.2 to take reasonable steps to recover loss from the ATOL holder and any guarantors, time will be deemed to have stopped running for the purposes of this clause 6.4 for the period that the CAA and/or the ATT are taking such reasonable steps.

6.5 The services provided by the Accountants under this agreement are separate from and unrelated to the Accountants' audit work on the Financial Statements of the ATOL holder for the purposes of the Companies Act 2006 as appropriate (the "statutory audit work"). The Accountants' obligations under this agreement are entirely separate from the statutory audit work for the ATOL holder. Nothing in this agreement should be taken to and shall not add to or vary or extend in any way or on any basis any duty of care the Accountants may have in their capacity as auditor of the ATOL holder's Financial Statements, nor to create any obligations or liabilities on the Accountants regarding the Accountants' statutory audit which would not otherwise exist.

7. FEES

7.1 The Accountants’ fees, together with VAT and out of pocket expenses, will be agreed with and billed to the ATOL holder, who will be responsible for the payment of such fees. Neither the CAA nor the ATT is liable to pay the Accountants’ fees.

8. QUALITY OF SERVICE

8.1 The Accountants will investigate all complaints. The CAA, the ATT and the ATOL holder have the right to take any complaint up with the relevant Professional Accountancy Body under which Accountants are designated as an ATOL Reporting Accountant.

9. PROVIDING SERVICES TO OTHER PARTIES

9.1 The Accountants will not be prevented or restricted by virtue of the Accountants’ relationship with the ATOL holder, the CAA and the ATT, including anything in these CAA Standard ARA-ATOL Terms of Engagement, from providing services to other clients. The Accountants’ standard internal procedures are designed to ensure that confidential information communicated to the Accountants during the course of an assignment will be maintained confidentially.

10. APPLICABLE LAW AND JURISDICTION

10.1 This agreement shall be governed by, and interpreted and construed in accordance with English law.

10.2 The ATOL holder, the CAA, the ATT and the Accountants irrevocably agree that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute (including claims for set-off and counterclaims) which may arise in connection with the validity, effect, interpretation or performance of, or the legal relationship established by this agreement or otherwise arising in connection with this agreement.

11. ALTERATION TO TERMS

11.1 Without prejudice to the ATOL holder’s and the Accountants ability to agree additional terms that do not contradict or purport to contradict these CAA Standard ARA-ATOL Terms of Engagement no amendments and variations to these CAA Standard ARA-ATOL Terms of Engagement are permitted or binding unless agreed in writing and signed by the duly authorised representatives of the parties and the CAA. These terms supersede any previous agreements and representations between the parties in respect of the scope of the Accountants’ work and the Accountants’ Reports or the obligations of any of the parties relating thereto (whether oral or written) and, together with the matters included in the letter confirming the CAA Standard ARA-ATOL Terms of Engagement, represent the entire understanding between the parties. The CAA acknowledges that supplementary terms may be agreed between the Accountants and the ATOL holder but the CAA will not be party to those terms unless expressly agreed by the CAA. No terms negotiated between the ATOL holder and the ATOL holder’s accountant may contradict or purport to contradict the CAA’s mandated terms. Should they do so then the accountants’ reports will not be acceptable to the CAA. In effect this will be a failure by the ATOL holder to comply with the terms of its ATOL, and ultimately can lead to licensing action being taken against the ATOL holder.

12. TERMINATION

12.1 This agreement may be terminated by a party at any time by giving not less than 30 days’ notice to each of the other parties.

12.2 This agreement may be terminated by a party by notice with immediate effect if another party is unable to pay its debts or has a receiver, administrator, administrative receiver or liquidator (or in each case, the equivalent in another jurisdiction) appointed or calls a meeting of its creditors or ceases for any reason to carry on business or if in the reasonable opinion of the party wishing to terminate any of these events appear likely.

12.3 Notices must be in writing and delivered by hand or sent by registered post, in each case to the registered office of each party to this agreement, save that a notice will be validly delivered to the ATT if it is sent to the CAA. Any notice sent by post will be deemed to have been delivered 3 business days after sending.

Updated March 2016

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