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The UK’s New APD Takes Effect: NBAA Has the Story

April 22, 2013

Hear an Flight Plan podcast about the new tax on business aviation in the UK.

For NBAA Members headed to the United Kingdom, April 1 brought about the imposition of a new aviation tax – the Air Passenger Duty (APD).

Although this tax has applied to commercial passengers departing the UK since 1994, the APD is being imposed on business aviation operators for the first time, and even those who are familiar with it concede it can be confusing.

European Business Aviation Association (EBAA) President and CEO Brian Humphries said his organization is carefully watching the impact of the APD on business aircraft operators.

“It’s too early to say yet,” he said less than two weeks after the imposition of the APD on business operations. “But we have had some indication from operators who say they’ll no longer make Britain a port of call.”

Humphries, who is also chairman of the British Helicopter Association (BHA), harkened back to the imposition of an aircraft parking fee on aircraft spending more than 48 hours on the ground by authorities in Italy in 2011. EBAA figures indicate that duty played a part in an 18-percent drop in Italian business aviation traffic during 2012, while the rest of the European Union only saw traffic fall off approximately 4 percent during the same period compared to the year before.

Still, Humphries noted, the EBAA, BHA and the British Business and General Aviation Association (BBGA) had battled fiercely since the initial APD proposals were made years ago.

“When [Her Majesty’s Treasury] launched this, they were targeting £186 per flight for business jets and helicopters, regardless of destination. We fought that to a standstill. We were able to demonstrate to them that this is business travel,” he said.

The arguments paid off. Now, the APD for most business aircraft operators looks very similar in application to the way it is applied to commercial operators.

The APD applies solely to flights departing the UK, according to Peter Korns of the NBAA’s Operations Services Group (OSG). The tax varies according to the weight of the aircraft, the passenger capacity and the distance it travels. Business aircraft between 12,566 and 44,092 pounds are subject to the same rates as commercial airlines. Passengers on business aircraft over 44,092 pounds with fewer than 19 seats must pay a higher APD rate:

Bands
(Distance from London)
Reduced Rate:
(12,566 to 44,092 lbs.)
Higher Rate:
(Above 44,092 lbs.)
Band A (0-2000 miles) £13 £52
Band B (2001-4000 miles) £67 £268
Band C (4001-6000 miles) £83 £332
Band D (over 6000 miles) £94 £376

There are three basic payment plans, including simplified reporting procedures for operators that travel to the UK 12 or fewer times each year, Korns said.

  • Monthly: After completing a rather exhaustive registration process, operators that travel to the UK frequently must report activity on a monthly basis and must make APD payment to Her Majesty’s Revenue and Customs (HRMC) within seven days of each flight.
  • Occasionally: Operators flying no more than a dozen trips to the UK within a year may combine the reporting and payment process using Form APD-6, as long as the reports and payments are submitted within seven days of travel and the operator incurs less than £5,000 of APD liability in a given year.
  • Annual: Operators incurring less than £500,000 of APD liability in a single year can choose to make APD payments through the Annual Accounting Scheme. However, Korns cautioned, this method of payment does require more thorough registration.

While the APD brings “billions” of pounds sterling in revenue to Her Majesty’s Treasury each year when applied to commercial air operations, it is nowhere near as lucrative when applied to business aviation, according to Humphries.

“APD on business aviation is at most going to bring in £7 million a year,” Humphries projected. “It will probably cost £3 million to administer. So there isn’t great pressure to enact it, apart from political pressure.”

That pressure was brought in part by some of the UK’s low-cost carriers. Now, however, Humphries said the pressure has been reversed. The aviation community and the traveling public appear united against the APD.

“There is strong pushback among voters,” he noted. “That has worked in some cases. Ireland, for instance, has taken it out. The Isle of Man has refused to apply it. There will be continuing pushback.”