Air Passenger Duty

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Air Passenger Duty (APD) is an excise duty which is charged on the carriage of passengers flying from a United Kingdom or Isle of Man airport on an aircraft that has an authorised take-off weight of more than ten tonnes or more than twenty seats for passengers. The duty is not payable by inbound international passengers who are booked^[1] to continue their journey (to an international destination) within 24 hours of their scheduled time of arrival in the UK. (The same exemption applies to booked onward domestic flights, but the time limits are shorter and more complex.) If a passenger "stops-over" for more than 24 hours (or the domestic limit, if applicable), duty is payable in full.

Rates

Air Passenger Duty charges take distance into account, making long distance flying significantly more expensive.^[2] One of the stated benefits of APD was to offset the environmental impact of air travel (see below) but critics^[3] point out that the tax takes no account of the efficiency of the aircraft. An airline using an old inefficient plane is treated equally to one using the latest most efficient engines.

Air passenger duty is paid upon booking, but not collected until an occupied seat flies. Should a passenger be unable to fly they have a right to claim the paid tax back from the airline, although many airlines will charge an administrative fee for this service.^[5]

A £0 rate of APD applies to flights from Northern Ireland direct to a band B, C or D destination as of 1 November 2011. This is due to Continental Airlines threatening to stop the direct Belfast - Newark flight due to lack of demand because of the tax.^[6]

Rates in prior periods

Air Passenger Duty was controversially^[7][8] doubled^[9] from 1 February 2007, and the lower rate was extended to all the countries within the Single European Sky. This table summarises the changes:

Here, 'European destinations' includes countries in the European Economic Area and certain other European countries.

Charges rose on 1 November 2009 and again on 1 November 2010. The distance used to calculate the new rate of APD is the distance between London and the capital city of the destination country as summarised below:

• If the seating in the lowest class has seats spaced at more than 1,016 millimetres (40.0 in) then the Standard Rate applies.^[10]

Flights from Northern Ireland have been charged at Band A from 1 November 2011. From 1 April 2013, APD was extended to cover flights on "business jets". (Source: Revenue and Customs website – data retrieved 22 July 2012.)

Impact of APD

The Treasury forecast that the 2007 rise would cut carbon dioxide emissions by about 0.3 million tonnes a year by 2010-2011, and all greenhouse gas emissions by the equivalent of 0.75 million tonnes of carbon dioxide a year,^[11] although that has been disputed.^[12]

In 2011, the Treasury launched a consultation on potential revisions to Air Passenger Duty. In their consultation they stated "Air passenger duty is primarily a revenue raising duty which makes an important contribution to the public finances, whilst also giving rise to secondary environmental benefits".^[13]

Also, in 2011 an alliance of business groups. airports, airlines, destinations and trade associations came together to form the campaign group 'A Fair Tax on Flying', calling for the Treasury to conduct a macro-economic impact-assessment of the tax, and to reform and reduce the tax.^[14]

The Chancellor's Autumn Statement, on 29 November 2011, announced an 8% increase in UK APD set for April 2012.

In 2013 a study by PwC, 'The Economic Impact of Air Passenger Duty', found that abolition of APD could provide an initial short-term boost to the level of UK GDP of around 0.45 % in the first 12 months, averaging at just under 0.3 % per annum between 2013 and 2015. It stated that this increase would permanently raise UK economic output, to the point where the economy could be up to £16bn larger in the period 2013-15 than under the current system of APD. In addition, it found that abolition would result in an increase in investment and exports, implying investment may rise by 6% in total between 2013 and 2015, with exports rising by 5% in the same period. Almost 60,000 jobs could be created between 2013 and 2020, and although the abolition of APD would result in £3-4bn in lost revenue to the Treasury, PwC’s "cautious" analysis suggests that this would be offset by increased receipts from other taxes. The report concludes that this would lead to a positive net gain of £0.25bn per annum for the Government, or in other words, that abolishing APD could pay for itself, though increased Government revenue from other sources primarily due to business growth achieved through the benefits brought by abolishing APD.^[15]

At the 2014 Budget the Chancellor announced the removal of bands C and D of APD, coming into effect from 1 April 2015. It means that from 2015, the highest APD band levied was band B.^[16]

The tourist minister of Kenya, Najib Balala, criticised APD for hurting tourism and economy in developing countries.^[17]

Devolution of APD to Scotland

When the process of devolving APD to Scotland are complete, the Scottish Government intends to reduce the rate by 50%, and eventually abolishing it completely once finances allow. This has caused concern that such a move could damage tourism in England.^[18]

In August 2015, Deputy First Minister John Swinney and Infrastructure Secretary Keith Brown jointly chaired the first meeting of the Scottish APD stakeholder forum to begin the process of designing and developing a Scottish APD.^[19]

See also

• Airport improvement fee, a related fee charged by the airport or government
• German air passenger taxes
• The Irish Air Travel Tax
• Ian Pearson
• French airplane ticket tax

References

External links

• HM Revenue & Customs Notice 550 Air Passenger Duty
• Daily Telegraph campaign
• Air Travel Advice Bureau Air Travel News feed