ATOL is funded by travel companies, which are required to pay £2.50 per traveller into a central ATOL fund. This money is used allow holidaymakers to complete their holidays or issue refunds should a travel company collapse.
This charge is not a tax on individuals or an insurance premium – the law requires travel companies to pay it, not holidaymakers. However, some travel companies choose to highlight the ATOL scheme cost by showing it separately on receipts and invoices.