UK's Treasury launches a consultation on the proposed taxation change from passenger duty to plane duty

UK's Treasury launches a consultation on the proposed taxation change from passenger duty to plane duty | HM Treasury, Air Passenger Duty, Plane Duty
Fri 1 Feb – Following the announcement last year of the UK Government’s intention to replace Air Passenger Duty with a duty on a per plane basis, the Treasury has launched a consultation process. The Government believes a plane duty is a fairer basis on which to raise revenue from the aviation industry to pay for public services including public transport and the environment, and will also encourage the more efficient use of aircraft.
The consultation process will run for twelve weeks, closing on 24 April 2008, and the implementation of the new duty will commence on 1 November 2009. The consultation document puts forward a number of proposals for how it would operate, and issues under consideration include the basis of the duty, exemptions, general aviation, impact on the freight industry and administrative details.
The Government has set out a number of guiding principles in the process:
·         ensure the aviation industry makes a greater contribution towards its environmental costs and to ensure that the aviation sector continues to contribute fairly and equitably towards the funding of public services;
·         have a fairer duty more in line with the environmental impacts of flights, including the distance travelled, and which takes account of any social or economic impacts including market distortions;
·         provide incentives for the more efficient use of planes by taxing similarly sized aircraft the same, no matter how full the plane;
·         as a starting assumption, apply aviation duty to all flights taking off from the UK, as all aircraft produce emissions;
·         have a simple, transparent and coherent duty which imposes minimal administrative burdens on industry and Government and minimizes the capacity for non-compliance and for artificial tax-motivated behaviour which does not deliver environmental benefits; and
·         ensure that it is compatible with the UK’s commitments under international law, including the Chicago Convention, bilateral agreements and EU law.
The basis of the duty will consist of both a measure that reflects the environmental impact of the aircraft and a measure of the distance travelled on the flight in question. The lead option favoured by the Government is to use the Maximum Take-Off Weight of the aircraft together with a banded system for defining the distance travelled, although it has also considered including factors such as NOx and CO2 emissions during landing and take-off. The consultation document does not consider the precise rates that would be applied and will only be confirmed once the basis of the duty is confirmed.
The duty includes all flights, including empty flights, with a de minimis weight limit of over 5.7 tonnes which therefore excludes light aircraft but does embrace air freight operations for the first time. The distance factor would be determined by a predetermined geographic band – three are proposed – defined either by membership of the European Economic Area (EEA) or the distance of the capital city from London. Aircraft under the 5.7 tonne limit will be subject instead to fuel duty on domestic flights.
The Government acknowledges that this could potentially result in large differentials in the duty between short and long haul flights and lead to market distortion through both operator and passenger changes in behaviour, for example through passengers choosing to fly to a destination through an intermediate hub.
The duty will apply to all flights taking off from the UK, with the duty point being the point of take-off. Whether and how this is passed onto passengers will be a commercial decision to be made by the industry, says the document. How the duty is collected is under consideration, with two options proposed: to be collected and accounted for by airports, or to be paid by the aircraft operators. The former is considered by the Government to be the simpler option.
The Government encourages responses to the consultation from industry bodies, organizations, companies and individuals from all parts of the aviation sector and “those with an interest in the important issue of aviation’s impact on the environment”.
The 90-page consultation document can be downloaded from the Treasury’s website:
Contact details are:
Aviation Duty Consultation
Environment and Transport Taxes
HM Treasury
1 Horse Guards Road
London SW1A 2HQ
United Kingdom
Tel: +44 (0)20 7270 5200
Fax: +44 (0)20 7270 4589



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