Air Passenger Duty

24 March 2014

Air Passenger Duty (APD) was introduced in 1994 with a £5 rate for the UK/EU and £10 elsewhere.

Since then, it’s seen several increases and a doubling for passengers travelling other than in economy class (Reduced Rate = economy class; Standard Rate = premium class).

Four geographical bands were introduced in 2009 based on the distance from London to the capital city of the country concerned (with the exception of the Russian Federation which is split east and west of the Urals).

HM Treasury consulted on APD reform in March 2011 including a possible move from four to two bands, inclusion of premium economy type seats in the reduced rate, the introduction of a lower regional rate/congestion charge for capacity constrained airports, and the possibility of devolving APD in Scotland, Northern Ireland and Wales.

The Government decided not to make any changes to the structure of the APD regime and announced it would introduce legislation to devolve aspects of APD to the Northern Ireland Assembly. Further, that they would continue to explore the feasibility and likely effects of devolution to Scotland and Wales. They refrained from announcing a congestion charge for capacity constrained airports and said they would continue to examine the role of the tax system to support rebalancing the UK economy across the regions.

APD rates will increase in line with inflation from 1 April 2014 and the RPI uprating will continue in 2015.

It was announced in the Budget that, from April 2015, bands C and D will be abolished and those destinations will be charged at band B rates.

The future rates are shown alongside the current ones:

Bands (approximate distance in miles for the UK) Reduced rate  Standard rate
  Rate from 1 April 2014 Rate from 1 April 2015 Rate from 1 April 2014 Rate from 1 April 2015
Band A (0-2000 miles) £13 £13 £26 £26
Band B (2001-4000* miles) £69 £71 £138 £142
Band C (4001-6000 miles) £85 Abolished £170 Abolished
Band D (over 6000) £97 Abolished £194 Abolished
*from April 2015 this will include all long-haul flights currently in band C or D
  • APD was extended to business jets in April 2013. This includes all flights on aircraft with an authorised take-off weight of 5.7 tonnes or more. The Higher Rate of APD applies to flights on aircraft of over 20 tonnes but with fewer than 19 seats.  From 1 April 2015, the higher rate will be six times the reduced rate.
     
  • From 1 January 2013 the rates for direct long-haul flights from NI were devolved to the Northern Ireland Executive, and set at £0. Direct long haul journeys from NI are those where the first part of the journey is to a destination outside Band A.

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

In late 2013, HM Treasury confirmed that extra leg room seats in economy class would not attract the Standard Rate but would be charged at the Reduced Rate.

Per the Office of Budget Responsibility (OBR) forecasts, APD is expected to provide £3.2bn receipts in 2014-15, rising to £3.9bn by 2018-19.

ABTA’s position

ABTA accepts that aviation should pay its proper environmental cost but believes that cost is more than reflected in the current APD levels. This is particularly true with the introduction of the Emissions Trading Scheme (ETS).

ABTA has campaigned vigorously with its trade partners through the A Fair Tax on Flying campaign (see below) to have APD frozen until a proper economic impact assessment of APD is carried out by HM Treasury.

ABTA believes the general public must not be disenfranchised by the Government using economic instruments as a means of raising the costs of aviation and that UK travellers should not be penalised by a form of double taxation (APD and ETS). Tax rises are socially regressive and will impact most upon those who can least afford it and lead to families being priced out of taking flights. This is especially acute for lower socio-economic groups and ethnic minorities visiting friends and relatives abroad.

ABTA welcomed the Chancellor’s cut to Air Passenger Duty, as announced in the Budget on 19 March 2014, and changes to the banding system as a first step in the reform of this damaging tax. Moving all long-haul flights into Band B of APD will save passengers and businesses over £200m annually, and should boost travel and tourism as well as promote greater UK connectivity. ABTA will continue to call for a reduction in overall rates of APD which, at their current Band A and B levels, will continue to inhibit the contribution of the travel and tourism sector to growth and employment. ABTA will also review any potential anomalies created by the new banding system, and work with Government to mitigate their impact.

A Fair Tax on Flying campaign

A fair tax on flying logoABTA is a founding member of the A Fair Tax on Flying campaign, an alliance of more than 30 leading travel organisations including airlines, airports, trade associations and destinations who believe that APD is now too high and that it is negatively impacting on the economic competitiveness of the UK. The campaign is calling on the Treasury to freeze APD pending commissioning a comprehensive study into the full economic effects of aviation tax in the UK, including its impact on employment.

For more information, please visit www.afairtaxonflying.org or visit our Facebook page.