BlueSky: APD: A disproportionate rise
By Patrick Margetson-Rushmore, chief executive, London Executive Aviation (LEA).
In the latest Budget, George Osborne, the Chancellor of the Exchequer, announced a rise in Air Passenger Duty (APD) for business jet operators. As we are all very aware, APD is an excise duty levied on the carriage of all passengers flying from a UK airport, if the aircraft weighs more than 5.7 tonnes. From April 1 2015, APD will rise, for business jet operators, to six times the APD rate for an economy class flight on a scheduled airline, up from the current status of four times the APD rate for an economy class flight on a scheduled airline. No one in the business aviation industry objects to paying our fair share in taxes, but such a sharp rise would be disproportionate. After all, the result could represent a 50% annual increase in APD for business jet operators in the UK (London Executive Aviation for example already pays £230,000 APD duty per annum). An APD rise burdens a business aviation industry that contributes, directly and indirectly, billions of pounds to the UK economy.
At the current APD rate, a 20-tonne aircraft, with fewer than 19 seats, pays £52 APD per passenger for a Band A flight (a flight less than 2,000 nautical miles) or £268 APD per passenger if the flight is Band B (over 2,000 nautical miles). For example: on an Embraer Legacy 650, which can easily fly over 2,000 nautical miles, with the maximum 13 passengers on board, APD could come to a total of £3,484 for a single flight from a UK airport. These figures will rise to £78 (Band A) per passenger and £426 (Band B) per passenger when the new APD level is introduced, representing a total £5,538 for the equivalent Legacy 650 flight.
Furthermore, a survey by the Baltic Air Charter Association (BACA) indicates 25% of non-UK business jet operators do not pay APD when they fly from a UK airport and are therefore technically operating outside UK law, undercutting UK business aviation operators. Clearly, law-abiding UK businesses should not suffer an unfair disadvantage because of APD. A number of UK-based business jet operators – the type of SME businesses the government claims to be eager to support – will be less able to compete, under the new APD regime, in the international marketplace.
A tax proposal relating to any industry should ensure rates and taxes remain at an affordable rate for all businesses to prosper and grow, and create a level playing field for UK companies to compete effectively internationally. These objectives have clearly not been high in the priorities in the Budget announcement of March 19 2014.
If the government expects GDP for the UK to grow by 2.3% in 2015 and 2.6% in both 2016 and 2017, the Chancellor should recognise that he must support UK businesses, specifically those SMEs that contribute a significant amount to the economy as a whole.
As part of the continued and ongoing UK recovery, the government should take steps to reduce, not increase, APD for business jet operators. Some industry experts are calling for an end to APD. I can certainly see the advantages of such a proposal.
APD was originally presented as an environmental tax. Millions of pounds are raised by environmental taxes; I wonder where it all goes?
Published in: BlueSky 27 March 2014
This article also appeared on www.ft.com on 21 March 2014
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