Air passenger duty (APD) is perhaps, one of the more hidden or stealth taxes on the statute book. It was introduced by the John Major Conservative Government in 1993/94, which now brings in approximately £3.7bn a year. (Indeed, it is so well hidden that it does not feature in the eight-volume Tolley’s Orange and Yellow Tax Handbooks!).
The APD rules are set out in the Finance Act 1994 and accompanying regulations. APD is a cost you or I bear when booking an aeroplane flight from the UK. The duty is a liability of the operator of the aircraft and is chargeable for each passenger flying from UK airports to domestic and international destinations.
APD follows a band structure and rates vary by destination and class of travel. The duty is generally payable by the operator not later than 29 days following each (monthly) accounting period and returns must generally be filed by or on behalf of the operator within 22 days of the end of that period.
The application of the tax would seem to be particularly severe for airlines serving UK domestic routes. This is because, in broad terms, APD is payable only in respect of flights from UK airports and is, therefore applied to each leg of a domestic return flight. That means, for example, that a return flight from Cardiff to Manchester is taxed at £26, while the duty on a Glasgow to Malaga return costs half that.
There are critical political factors in relation to the environment and state aid. While the introduction of APD was not driven by environmental concerns, any substantial changes to APD now will clearly need to take account of these concerns.
It will be very interesting to see how the Government deals with this as events unfold. The implications for the UK corporate tax system could be significant especially as the UK leaves the EU and, consequently has the option of no longer applying EU state aid rules in the future.
If you have a question or a problem involving your companies tax situation, then get in contact with Michael Fluss using the details below.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.