UK Air Passenger Duty (UK APD) – How it Applies to UK Business Aviation

> and | March 19, 2013 | 4 Comments
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UK Air Passenger Duty (UK APD) – How it Applies to UK Business Aviation

The UK government will extend the Air Passenger Duty (APD) to General Aviation (GA) starting on April 1, 2013. The good news is that 3rd-party providers, and the industry as a whole, are working with HM Revenue and Customs (HMRC) daily to find solutions and clarify the processes for operators to move forward.

The information below is an overview of what’s currently slated for implementation. Changes to these regulations are expected, and updates will be provided as soon as new information is received and confirmed.

1. Understanding UK APD

The European Union (EU) introduced legislation in 2010 to include business aircraft operators in EU APD collection. The 2011 budget extends APD to business aircraft for the first time. The purpose of this inclusion is to support the EU’s objective of a standardized tax system for business aircraft operators. While some EU countries are currently collecting APD on GA flights, the UK has delayed collection of APD until April 1, 2013. The amount of APD collected varies by country, aircraft weight and length of flight leg. This duty applies only to passengers, and not to crew. Also, this is a tax applicable to departing passengers, and payment may be done on a per-flight, semi-annual or annual basis depending on the circumstances. The important thing to note is that this affects business aviation as a whole, both charter (non-scheduled commercial) and private non-revenue.

2. Know the regulatory basis for APD in the UK

Legislation setting out what aircraft are considered to be chargeable for the purposes of APD is contained in Section 29 of the UK Finance Act of 1994. Section 30 sets out applicable rates for distance flown (grouped by "bands" [See table below.]), Section 31 sets out which passengers are considered to be exempt from APD, and Section 43(1) defines who is a passenger.

3. Some operations are exempt from UK APD

UK APD exemptions exist for emergency, training, military, humanitarian, search-and-rescue and air ambulance flights. Diplomatic flights must pay the duty, but it may be reclaimed from the Foreign and Commonwealth office by the appropriate government in the same manner as for any reclamation of duties and taxes. Also, aircraft that are operating as Head of State will be exempt, but you must indicate the type of flight in the International Civil Aviation Organization (ICAO) portion of the flight plan. UK APD does not apply to cargo flights. There’s a general exemption for aircraft under 5.7 metric tons (12,500 lbs.) Maximum Takeoff Weight (MTOW), as well as for passengers in transit. It’s best to confirm exemptions, as they may or may not apply in your particular case, with your 3rd-party provider. UK APD is also exempt in the case of tech stops (no passengers disembarking or embarking).

4. Rates for APD are highest in the UK

APD rates vary among EU states and depend on the length of flight and aircraft type, but the highest rates are for operations departing the UK. For example, a G4 traveling from the UK to the US is £268 (€306.00) per passenger, compared to an average of £23.2 (€26.7) for other EU states.

5. Be aware of premium APD rates in UK

The majority of passengers flying aboard business aircraft pay APD at the same rates as passengers aboard commercial flights. The UK, however, has introduced new premium rates of APD for passengers on flights using aircraft of 20,001 metric tons (44,094 lbs.) or more with fewer than 19 seats. Flights in this category pay APD at double the prevailing standard business/first-class APD rate. The following is the rate schedule provided by the HMRC in a briefing:

Table 1: UK APD Rate Schedule
Bands
(Miles)
Reduced rate:
Aircraft 5,700-20,000 kg
Standard rate: Higher (premium) rate:
Aircraft ≥20,001 kg and <19 seats
Band A (0 – 2000) £13 £26 £52
Band B (2001 – 4000) £67 £134 £268
Band C (4001 – 6000) £83 £166 £332
Band D (over 6000) £94 £188 £376
  • Bands: Each band is the approximate mileage from the UK.
  • Reduced rate: Applies where the passengers are carried in the lowest class of travel on any flight, unless the seat pitch exceeds 1.016 meters (40 inches). In that case, whether there is one or more than one class of travel, the standard rates apply.
  • Standard rate: Applies where passengers are carried in any class of travel other than the lowest or where the seat pitch exceeds 1.016 meters (40 inches), unless the conditions for the higher rate below are met.
  • Higher rate: Applies if passengers are carried on aircraft with an authorized takeoff weight of 20,001 kg or more and equipped to carry fewer than 19 passengers.

Note: For a list of the bands, please download the PDF from HMRC’s Website. In the PDF itself, the band information is on pages 43-52.

6. Know how UK APD will impact your specific operations

APD for the UK is based on MTOW and distance flown and seat pitch. The two MTOW categories are 5,700-20,000 kg and 20,001 kg and above.

For example, if you’re flying a 0-2000-miles Band A, APD will be £13 per passenger for the lower-weight category, assuming the aircraft has fewer than 19 seats and the seat pitch doesn’t exceed 40 inches (in which case the standard rate applies), and £52 per passenger for aircraft over 20,001 kg and equipped with fewer than 19 passenger seats.

For a flight leg of over 6,000 miles, UK APD is £94 and £376 per passenger, respectively, for the different weight categories. When calculating the fees due for a flight, it’s important to note that calculations aren’t necessarily based on your actual destination. Mileage is only calculated from the UK to the appropriate country’s capital city. See examples below:

Example 1: UK APD flight calculation – UK to KLAX
Flight: UK to Los Angeles Intl (KLAX)

  • A/C type: Falcon 50-38,000 lbs. (17,236 kg) MTOW
  • Number of passengers: 3 (seat pitch 40 inch or less)

The following duty calculation is based on the flight information and Table 1, above:

  • Because this aircraft is below 20,000 kg MTOW, it falls into the Reduced Rate Column.
  • According to "Appendix 1 – Destinations by Band" in Notice 550, this flight falls into Band B (U.S.; Washington, D.C.)
  • Duty paid at reduced-rate Band B: £67 per person
  • Total duty to collect: £201

The mileage here is calculated only from the UK to Washington, D.C., and not to destination KLAX. The U.S. is in Band B, and you are only liable for the mileage from the UK to Washington, D.C. For a Falcon 50, its weight falls in the "Reduced rate" category, so the duty needed to be collected for three passengers on that leg is £201, or £67 per passenger.

Example 2: UK APD flight calculation – UK to UUDD
Flight: UK to Domodedovo, Moscow (UUDD)

  • A/C type: Falcon 50-38,000 lbs. (17,236 kg) MTOW
  • Number of passengers: 3 (seat pitch 40 inch or less)

The following duty calculation is based on the flight information and Table 1, above:

  • Because this aircraft is below 20,000 kg MTOW, it falls into the Reduced Rate column.
  • According to "Appendix 1 – Destinations by Band" in Notice 550, this flight falls into Band A (Russia, Moscow)
  • Duty paid at reduced rate Band A: £13 per person
  • Total duty to collect: £39

03/22/13: Updated by author

7. APD adds cost to operations

Extension of APD to GA flights for aircraft above 5.7 metric tons MTOW is estimated to bring an additional 50,000 flights annually within the APD scope. Between 5 and 10 % of these flights are expected to be captured by the new premium tax rate.

8. Understand how this duty is paid

APD is calculated based on departures of applicable flights. It’s not an arrival tax. In some cases, your ground handler may be able to pay APD due, but this is currently not an option for the UK. APD may be paid directly by operators who’ve registered in the UK, but this requires an account for each operator and correct monitoring of APD due. The UK APD collection is governed by the HMRC, and payments should be made to them. The HMRC website contains information on APD regulations. While payment procedures are not yet fully established, APD may be collectable as a per-flight, semi-annual or annual charge based on average passenger loads. In order to qualify for the annual accounting scheme, the operator must have UK APD annual revenue of less than £500,000. There is a special accounting scheme option that allows operators to average the number of passengers carried.

Also, for infrequent flyers, the HMRC is looking at options that will make the process easier. At this time, they are considering an "occasional operator’s scheme." In order to qualify for this option, you will need to have 12 or fewer flights per year and an APD liability of £5,000 or less.

9. What is the next step

As an operator, you are responsible for registering with the HMRC. The operator is financially liable, so appropriate payments need to be levied based on the regulation. Also, when you register for this, you must have a UK representative. 3rd-party providers are seeking more clarity on the different options available that will assist operators in these new changes. Once more information is known, notices will be sent out via different media.

Conclusion

If you’re an operator traveling to the UK, you must register with HMRC unless you qualify for the occasional operator’s scheme, in which case registration is not necessary, and you will need to account for and pay APD for each passenger departing the UK beginning April 1, 2013. Operators are financially liable for payment of APD to the HMRC. Other options for payment are still unknown at this time, and updates will be made as more information is released.

Questions?

If you have any questions about this article or need help managing your UK APD payments, contact us at lauraeverington@univ-wea.com or seanraftery@universalaviation.aero.

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About

With more than 20 years’ experience in the aviation services industry, most in the regulations arena,Universal Weather and Aviation, Inc. Manager of Global Regulatory Services Laura Everington is recognized as one of the business aviation industry’s preeminent authorities on all U.S. and international regulations. Laura and her team serve as liaisons to all the key regulatory bodies, including Customs and Border Protection, the Transportation Security Administration, and the Federal Aviation Administration, all of which regularly consult her for her opinion on rules creation. A naturally gifted orator, Laura, who joined Universal in 1990, is one of the industry’s most requested and respected speakers. By her own estimate, she has presented at more than 100 industry events around the globe on a variety of regulatory topics. She has also given countless interviews to the most read and respected business aviation trade publications. Laura, who is an acting member of the National Business Aviation Association’s Security Council, can be reached at lauraeverington@univ-wea.com.

About

Sean Raftery has more than 30 years of aviation experience, including over 20 with Universal Weather and Aviation, Inc. Based in Stansted, United Kingdom, Sean was an airman in the Royal Air Force where he worked in air traffic control and squadron operations. In 2002, he was appointed Managing Director of Universal Aviation UK and in 2010 took on the additional responsibilities as Managing Director of Ireland as well. Under Sean’s leadership, Universal Aviation UK and Universal Aviation Ireland, with FBO locations at Dublin and Shannon, have continued to grow and add new services, including the European Operations Centre and a new fuelling into plane business in Dublin. Sean has also been instrumental in Universal Aviation continuing to upgrade its facilities and recently led efforts in Dublin to relocate the location to a new, larger facility while in Stansted he oversaw the complete refurbishment of Universal Aviation Stansted in time for the 2012 Summer Olympics. Well respected within the business aviation industry, Sean has worked closely with government officials to develop and implement industry leading Health and Safety practices and was highly instrumental in influencing the UK government for fairer and better immigration procedures for visiting business jet passengers. Sean can be reached at seanraftery@universalaviation.aero.

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