Air Passenger Duty

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New rates of APD announced in the 19th March 2014 Budget, to start on 1st April 2015:

See details.

New rates of APD after 1st April 2015 compared with during 2014:  (No changes to APD in the March 2016 Budget)

Lower (standard) rate Higher rate
2014  From 1.4.2015   From  1.4.2016 2014 From 1.4.2015  From 1.4.2016
Band A0 – 2000 miles £13 £13 £13 £26 £26 £26
Band B2000 – 4000 miles £69 £71 £73 £138 £142 £146
Band C4000 – 6000 miles £85 £71 £73 £170 £142 £146
Band DOver 6000 miles £97 £71 £73 £194 £142 £146

 

From 1.4.2016  Private jets: Higher rate: (for travel in aircraft of 20 tonnes or more equipped to carry fewer than 19 passengers)   £78 under 2000 miles, and £438 over 2000 miles.

HMRC APD rates info


Also there would be no APD on economy tickets for children under 12 from May 2015 and for children under 16 from May 2016.

Loss to the Treasury of the amalgamation of Bands C and D into Band B after 2015
Exchequer impact (£m)

2014-5 2015 – 6 2016 – 7 2017 – 8 2018 – 9
Exchequer impact 0 – 215 – 225 – 230 – 250

 

These changes to APD have meant the total tax take by the Treasury are lower than they had been expected to be in earlier Autumn Statements.

The figures below show that, for 2015/16 the actual receipts from APD will be 3.1 billion. But they were anticipated to be £3.4 billion in the 2011 and 2013 Autumn Statements.

For 2018/19 the estimate of APD receipts in the 2015 Autumn Statement is £3.5 billion. But in the 2013 Autumn Statement, it was expected to be £4.3 billion. That is a difference, between those two years, of £0.8 billion that the Treasury has lost out on, due to air travel not being properly taxed.

APD tax take lower 2015 than 2011 Autumn Statement


Budget 16th March 2016

No mentions of APD, just a continuation of how it was during 2015 – with rises at the rate of inflation in April 2016 and April 2017:

“Air Passenger Duty (APD) rates – As announced at Budget 2015, all APD rates will increase by RPI from 1 April 2016. All APD rates will increase by RPI from 1 April 2017. (Finance Bill 2016 and Finance Bill 2017) “

https://www.gov.uk/government/publications/budget-2016-documents/budget-2016#backing-business-and-enterprise

Budget receipts from 16th March 2016 budget

From March 2016 Budget https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508193/HMT_Budget_2016_Web_Accessible.pdf

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The Treasury view of APD

The airlines and the aviation industry try to give the impression that APD is an iniquitous and deeply unfair tax on those who fly.

The reality is different. It is charged because there is no VAT or fuel duty charged on flying, unlike on almost every other sector.

Below are some quotes from the Treasury, showing that they regard APD as fair, and necessary. They reiterate why they charge APD.

1.  9.6.2015 in response to demands by airlines for an APD cut:

“A Treasury spokeswoman said: “The Government is committed to making sure APD is a fair tax for passengers. That’s why we’ve made it cheaper to fly through freezing APD for most passengers since 2012, exempting children and reducing the number of bands, meaning it’s now lower for many more long-haul destinations.
“The aviation companies that commissioned this report already pay no tax on the fuel used in international flights, no VAT on international flights and unlike in many other countries, no VAT on domestic flights.

“The Government has also helped them by cutting corporation tax rate to 20% – the lowest in the G20 (group of leading world economies) – saving businesses £9.5 billion a year from 2016.”

Link: http://www.expressandstar.com/business/city-news/2015/06/09/scrapping-apd-would-boost-economy/

2.  Page 10 of   Treasury document “Reform of Air Passenger Duty: December 2011- response to consultation”

“3.16 The Government has been clear that APD is primarily a revenue-raising duty which makes  an important contribution to the public finances, whilst also giving rise to secondary environmental benefits. Furthermore, VAT is not applied to flights and aviation fuel for commercial flights is not taxed”.

http://webarchive.nationalarchives.gov.uk/20130129110402/http://www.hm-treasury.gov.uk/d/condoc_responses_air_passenger_duty.pdf

3. Treasury comment on the PwC report commissioned by the airlines in 2013:

The FT reports that a Treasury spokesperson said APD, which is forecast to bring in £2.9bn this year, makes an “essential contribution” towards helping meet the government’s deficit reduction plans. “We do not recognise the figures in this report or agree with the assumptions behind it,” the Treasury said.  (see link)

http://www.ft.com/cms/s/0/46ace600-6ebf-11e2-9ded-00144feab49a.html#axzz2K4JNtKH2  


Changes to rate of APD for business/private jets

2014:  Private jets (which were exempt from APD until 2013 and which environmental groups campaigned for several years to have included) will from 1st April 2015 be subject to 6 times (x6) the economy APD rate per passenger. They pay 4x the economy rate in 2014.

So, from 1 April 2015, APD for private jet travel will be £78 per passenger(£13 x 6)  for Band A destinations (while it is £54 now) and £402 for Band B destinations (while it is £276 now).

In the 2012 budget, it was first announced that private/business jets (planes with a certified authorised weight of 20 tonnes or more and fewer than 19 seats) would at first pay just double the amount of APD of standard Band rates.

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RATES of APD in 2013 and 2014:

APD rates 2013 and 2014

From ABTA   http://www.abta.com/news-and-views/policy-zone/more/air-passenger-duty


 

For some recent news about APD,

see  News about Air Passenger Duty

2013 levels of APD


General background on APD:

Air Passenger Duty (APD) is an excise duty which is charged on the carriage of passengers flying from a United Kingdom airport on an aircraft that has an authorised take off weight of more than ten tonnes or more than twenty seats for passengers. The tax started in 2006, and rates have been increased several times since then.  It doubled  on 1st Feb 2007.  It increased again on November 1, 2009 and then again on November 1, 2010.

The duty is not payable by inbound international passengers who are booked 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.

The most recent increase was on 1st April 2012, with a rise of around 8%. It then increased on 1st April 2013 by the rate of inflation, and will do so again on 1st April 2014. See rates below.

The aviation industry has lobbied long and hard against this tax.

There are four destination bands based on geographical distance from London, each having two rates of duty depending upon the class of travel (economy or premium), so there are eight different rates of duty

As part of the 2008 Pre-Budget Report, Air Passenger Duty was restructured.  These new charges take distance into account, making long distance flying significantly more expensive.

Air Passenger Duty was introduced by Government to compensate for the fact that the aviation industry, for various arcane reasons, pays no VAT on any thing, and  pays no fuel duty.

Government figures suggest that the benefit to the aviation industry as a result of its paying no fuel tax or VAT is around £10 billion a year, APD brings in only £2 – 3 billion.  Many of the  ‘pleading poverty’, and opposing APD, or increases to APD,  have all recently made millions of pounds in profit. Budget airline Ryanair, for example, reported a £467 million profit in the six months to September 2011. BA has just reported large profits.

Airlines also claim  that the introduction of EU ETS, assuming it withstands the current battering, will mean that paying any APD will represent a ‘double counting’ of environmental costs. But APD was never designed as an exclusively environmental tax. Suggestions that all APD revenues should be ploughed back into environmental spending are best understood as an attempt to get the Government to spend money on measures that the industry would benefit from and should be funding itself, such as the development of cleaner technology that could cut fuel costs .

With the UK committed to making CO2 cuts of 80% by 2050, it is clearly unacceptable for aviation emissions to continue rising as they have done in the past, so additional environmental policies, such as the EU Emissions Trading System (which will reward airlines that manage to cut their emissions while punishing the most polluting), and specific UK carbon targets for the sector, are essential alongside Air Passenger Duty.

Critics of APD say the tax takes no account of the efficiency of the aircraft. An airline using an old inefficient plane is pays the same one using the more efficient engines.

The industry likes to make out that the charge has a dramatic effect on reducing the number of travellers, or the number of visitors to the UK, or on the ability of the UK economy to prosper.

Their campaigns to cut APD are self-serving, and self-interested.  In any one year in the UK (perhaps even more during this recession) about 50% of the population to do not fly. So any subsidies given to the industry, and thus to passengers who can afford to fly a lot, comes to the detriment of those who cannot afford these flights.

 


Air Passenger Duty – 10 Key Points  

(APD – 10 Key Points Briefing from SSE)

1. APD was introduced in 1994 by Ken Clarke, the then Chancellor of the Exchequer, not as an environmental tax but because he considered the aviation industry to be lightly taxed compared to other sectors, largely arising from its exemption from fuel duty and VAT.

2. It was initially set at £5.00 for short haul economy travel, which accounts for more than three quarters of all air travel. In 1997 Ken Clarke doubled APD to £10.00 for short haul economy flights.

3. Gordon Brown halved the short haul economy rate of APD in 2001, put it back up again to
£10.00 in 2007 and Alistair Darling raised it to £11.00 in 2009. George Osborne increased it to £12.00 in 2010. There was no increase in 2011 but it was raised to £13.00 in April 2012. Thus, for the vast majority of passengers APD has increased by just £3.00 (30%) over the past 15 years.

4. APD is payable only on departure from a UK airport and so the basic Band A rate of £13.00 is for a round trip to an overseas destination. APD is however payable on both legs of a domestic round trip within the UK.

5. APD raised £2.6 billion for public finances in 2011/12 and this is planned to increase to £3.9 billion by 2015/16. APD would, however, need to rise to four times its current level to offset the value of the industry’s exemption from fuel duty and VAT. If airlines paid the same level of fuel duty and VAT as road users, the cost to the aviation industry would be around £10.5 billion a year.

6. Not only do airlines pay no VAT on fuel, they are exempt from VAT on everything they buy
relating to the provision of air transport services. Mostly, VAT is not charged in the first place; aircraft and aviation fuel, for example, are zero rated. However, where VAT is charged, the airlines claim this back and in 2010/11, HMRC paid UK airlines a VAT rebate of £583 million (net).

7. In 2010/11, the latest year for which a detailed HMRC breakdown is currently available, 77% of passengers paid APD at the short haul economy rate (Band A).

8. Whilst it is true that “passengers can end up paying £184.00 tax on some flights”, as we are repeatedly told by the industry, this is the very top rate of APD and applies only to first class and business class passengers on long haul flights to countries whose capital city is more than 6,000 miles from London. Less than 0.4% of all air passengers fell into this category in 2010/11.

9. Regarding the alleged negative impacts on the UK economy of the recent hikes in APD, it is worth noting that overseas leisure trips by UK residents reduced from 60.1 million in 2008 to 49.2 million in 2011 – a fall of 10.9 million (21.5%) whilst the number of foreign tourists coming to the UK fell by less than 300,000 (1.6%) over the same period, from 23.8 million to 23.5 million. The effect of this was to reduce the UK’s tourism trade deficit by £6.8 billion and to boost spending in the domestic UK tourism industry by £5.1 billion over the same period (2011 vs 2008).

10. Finally, those in the aviation industry who are pressing the Government for APD to be reduced should explain how they would propose to make up the revenue shortfall to the Exchequer. Should we sack some more policemen, teachers or nurses? Should we cut pensions or welfare benefits?
Or should we raise VAT and/or extend its scope?

(the aviation industry has not questioned the accuracy of any of these figures).


 

How much is the effective subsidy air travel receives each year, from not paying VAT or fuel duty?

Around £10 – 11 billion.  See http://fullfact.org/factchecks/airline_industry_subsidies_green_taxes-3256

 

How much does APD contribute to the Treasury each year, and how much will it bring in during future years?

November 2011: “The Government hopes to recoup about £2.6 billion from the tax in 2011/12, up from £2.2 billion during the previous financial year. According to the Office of Budget Responsibility (OBR), the figure will increase to £2.8 billion in 2012/13. The OBR forecasts that APD will earn the Government £3.2 billion by 2014/15 £3.8 billion by 2016/17.”

29.11.2011 Telegraph
http://www.telegraph.co.uk/travel/travelnews/air-passenger-duty/8923504/Autumn-Statement-2011-Air-Passenger-Duty-rise-confirmed.html

(Page 77  of Treasury Autumn Statement 2011)    http://cdn.hm-treasury.gov.uk/autumn_statement.pdf



The Chancellor’s 2013 autumn statement (5.12.2013)  included these projections of income from Air Passenger Duty (only part of the table reproduced here)

APD forecasts to 2019 from autumn statement 2013

.from

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/263575/Autumn_Statement_2013.pdf


The Chancellor announced a further increase in Air Passenger Duty by the rate of inflation in April 2013.    link


 

The real facts about Air Passenger Duty:

APD  distance bands APD £ per passenger from 1 April 2012 

(old rates from 1.11.2010)   

Miles from UK                       Reduced rate                       Standard rate   *

                                     in lowest class of travel      in other than lowest                                                                                

                                                                                                class of travel

Band A (0-2000)                        £13   (£12)                           £26  (£24)

Band B (2001-4000)                 £65   (£60)                         £130  (£120)

Band C (4001-6000)                 £81   (£75)                         £162  (£150)

Band D (over 6000)                  £92   (£85)                          £184  (£174)

* premium classes, business class, first class etc 

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2013 rises in APD

All the Pre-Budget Statement on 5th December 2012 says (in the small print) is that “APD rates will increase by the Retail Price Index increase for September 2012 from 1 April 2013.”
The new rates are shown below – and include the rates for private jets, which will start to be taxed APD for the first time.
  •   Figures in orange are the 2012 prices
APD distance bands £ a year
(£ a passenger from 1 April 2013)
Miles from UK Reduced rate (in lowest class of travel) Standard rate (in other than lowest class of travel) Higher rate1
Band A (0-2000) £13   (13) £26  (26) £52
Band B (2001-4000) £67  (65) £134  (130) £268
Band C (4001 – 6000) £83  (81) £166  (162) £332
Band D (over 6000) £94 (92) £188  (184) £376
1 To apply to aircraft with an authorised take off weight of 20 tonnes or more, authorised to seat less than 19 passengers.

  http://cdn.hm-treasury.gov.uk/as2012_tax_and_tax_credit_rates_and_thresholds_051212.pdf

 


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From ABTA   http://www.abta.com/news-and-views/policy-zone/more/air-passenger-duty

APD rates 2013 and 2014


The tables specifying which countries and territories fall into each of the APD bands can be found on theHM Revenue & Customs website (page 43).


 

Air Passenger Duty (APD) – how much the aviation industry is under-taxed

In 2010/11 the exemption from fuel tax and VAT was worth more than £11 billion to the airlines.  After deducting APD revenues, the net benefit is around £9 billion – equivalent to a subsidy to the airlines of about £360 per household.   The 53% of the UK population who do not fly – mainly the less affluent – find themselves subsidising the aviation industry. (Details)  The amount of APD raised in 2010/2011 was around £2.2.

The rates of APD change on 1st April 2012, when the rates rise by around 8% – in line with inflation, taking into account the fact there was no rise in 2011.  The tax take is likely to be around £2.8 billion in 2012/2013.

That means the net benefit to the industry of its exemption from VAT and fuel duty will be around £8.2 billion, after April 2012. ( £11 bn – £2.8 = £8.2 billion)

The Treasury has reiterated that APD is not an environmental tax.  It was instituted in order to – in a small way – compensate for the aviation industry’s non-payment of fuel duty and VAT.  This is on Page 10 of   Treasury document “Reform of Air Passenger Duty: December 2011- response to consultation”

http://www.hm-treasury.gov.uk/d/condoc_responses_air_passenger_duty.pdf or

http://webarchive.nationalarchives.gov.uk/20130129110402/http://www.hm-treasury.gov.uk/d/condoc_responses_air_passenger_duty.pdf

“3.16 The Government has been clear that APD is primarily a revenue-raising duty which makes  an important contribution to the public finances, whilst also giving rise to secondary environmental benefits. Furthermore, VAT is not applied to flights and aviation fuel for commercial flights is not taxed”.

 


 

Details on APD compared to the benefits gained by  the aviation industry by not paying fuel duty and VAT:

(Details – letter dated November 2011)

Comparing costs of motoring compared to flying:

• Motorists pay 61p a litre duty on their fuel.  Airlines pay nil.   (see link )
• Motorists pay a further 20% VAT on their fuel.  Airlines pay nil.
• Motorists pay 20% VAT to have their car serviced.  Airlines pay nil.
• Motorists pay 20% VAT to buy their car.  Airlines pay no tax on new aircraft.

So as the aviation industry pays no duty and no VAT, there is Air Passenger Duty instead.

This tax is charged at only £12 (£13 from 1.4.2012)  per passenger for any short haul flight (under 2,000 miles) departing from a UK airport.  Not on return trips.  £13 on a holiday trip to anywhere in Europe does not seem a lot.  The price of one or two main course in a restaurant?  or 3 or 4 cups of coffee?

Higher rates of APD apply to longer flights. The APD rates (Nov 2011 – slightly higher from April 2012, see above) are:

Distance to capital city from London Economy / Premium   After 1.4.2012 
Band A (less than 2000 m)                   £12 / £24                    £13 /  £26
Band B (2001m – 4000m)                    £60 / £120                  £65 /  £120
Band C (4001m – 6000m)                    £75 / £150                  £81 /  £150
Band D (6001m+)                                   £85 / £170                  £92 /  £174

The Treasury says: APD is an excise duty which is charged on the carriage, from a UK airport, of chargeable passengers on chargeable aircraft.  Details

Information on APD on Wikipedia, including old rates, at http://en.wikipedia.org/wiki/Air_Passenger_Duty

For more information on economic and employment topics, see
Details of Economics and Employment publications and links to them
and briefings at  Economics & Employment Briefings & Information 
 

 


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APD on business jets:

Air passenger duty (APD) will be extended to smaller aircraft and business jets (5.7 tonnes
threshold), effective from 1 April 2013. Passengers aboard luxury business jet flights will pay new premium rates of APD set at double the business/first class (standard) rates of APD.

The majority of passengers flying aboard business jets will pay APD at the same rates as
passengers aboard commercial flights. To ensure the tax is fair, the Government is
introducing new premium rates of APD for passengers on flights using planes with a certified authorised weight of 20 tonnes or more and fewer than 19 seats. Flights in this category, which tend to offer a luxury service, will pay APD at double the prevailing standard
business/first class rates of APD.

[It is expected to bring in to the Treasury about £5 million each year, from 2013/14 to 2016/17.]

http://www.hm-treasury.gov.uk/d/apd_business_jets_and_northern_ireland.pdf

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UK airlines seek to evade taxation

Nov 18 2011 (Aviation Environment Federation)

While both EU and non-EU airlines have been complaining noisily about the modest amount they will be required to pay for emissions permits from 2012 under the EU ETS, four UK and Irish airlines this week had a go at Air Passenger Duty – the only tax in the UK levied on flights. Ryanair, Easyjet, Virgin Atlantic and British Airways have called for the duty to be scrapped ahead of George Osborne’s statement later this month, in which he is expected to announce APD increases. With public finances stretched, a number of taxes such as VAT have already been increased, while APD rates have so far been frozen.

AEF gave comment to Channel 4 News, noting that while Government figures suggest that the benefit to the aviation industry as a result of its paying no fuel tax or VAT is around £10 billion a year, APD brings in only £2 billion. The four airlines ‘pleading poverty’, notes Channel 4, have all recently made millions of pounds in profit. Budget airline Ryanair, for example, reported a £467 million profit in the six months to September 2011.

Airlines have also claimed that the introduction of EU ETS, assuming it withstands the current battering, will mean that paying any APD will represent a ‘double counting’ of environmental costs. But APD was never designed as an exclusively environmental tax. Suggestions that all APD revenues should be ploughed back into environmental spending are best understood as an attempt to get the Government to spend money on measures that the industry would benefit from and should be funding itself, such as the development of cleaner technology that could cut fuel costs .

With the UK committed to making CO2 cuts of 80% by 2050, it is clearly unacceptable for aviation emissions to continue rising as they have done in the past, so additional environmental policies, such as the EU Emissions Trading System (which will reward airlines that manage to cut their emissions while punishing the most polluting), and specific UK carbon targets for the sector, are essential alongside Air Passenger Duty.

http://www.aef.org.uk/?p=1340

 


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House of Commons Library Standard Note, on Taxing Aviation Fuel

October 2012

Contains some useful information, but is somewhat muddled and inconclusive.

Taxing aviation fuel (12 pages, 89 KB)