Air Passenger Duty (APD)

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.

See our press release

On 6 December 2011, the Government announced there will be NO CHANGE to the current APD regime, apart from changes announced in September and in the 29 November 2011 Autumn Statement.

The Government has announced it will introduce legislation as soon as possible to devolve aspects of APD to the Northern Ireland Assembly.  Further, that it will continue to explore the feasibility and likely effects of devolution to Scotland and Wales.

The Government has refrained from announcing a congestion charge for capacity constrained airports at this time.  They’ve said they will continue to examine the role of the tax system to support rebalancing the UK economy across the regions.

The following will take effect:

• Effective 1 November 2011, all direct flights from Northern Ireland to long-haul destinations to be charged at the Band A rate. Further, that the Government has launched a parallel process to devolve aspects of APD to the Northern Ireland Assembly, as recognition of its unique circumstances (announced 27 September in response to the Northern Ireland Affairs Committee).
• A double inflationary increase to take effect on 1 April 2012 (this and the following were all announced in the Autumn Statement of 29 November).
• Effective 1 April 2013, business jets will be included in the APD regime. This includes all flights on aircraft with an authorized take-off weight of 5.7 tonnes or more. However, flights on aircraft of over 20 tonnes but with less than 19 seats will have to pay a new premium rate of APD which will be double the standard rate for each of the bands. 
• Exemptions will continue for certain passengers and flights. This includes flights from the Scottish Highlands and Islands, as well as emergency, police and medical flights. Helicopters, and aircraft fuelled by aviation gasoline are also excluded.

Per the Office of Budget Responsibility (OBR) forecasts, APD is expected to provide £3.2 billion receipts by 2015 and £3.8 billion by 2017 (against £2.2 billion forecast for 2011. These figures although large are lower than previous forecasts reflecting fewer air passengers.

Current and new rates effective 1 April 2012

The new rates are shown alongside the current ones:

*includes direct long-haul flights from Northern Ireland.

The tables specifying which countries and territories fall into each of the APD bands can be found at www.hmrc.gov.uk/pbr2008/pbrn20.pdf.

Effective 1 April 2013
Inclusion of business jets.

ABTA’s Position

ABTA campaigned vigorously with its trade partners through the Fair Tax on Flying alliance to have APD frozen at the 2009 levels pending introduction of the Emissions Trading Scheme (ETS) in 2012. ABTA believes the general public must not be disenfranchised by using economic instruments as a means of raising costs of aviation. 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 accepts that aviation should pay its proper environmental cost but believes that cost is more than reflected in the current APD levels. ABTA is concerned that the Government intends continuing with APD now that aviation has joined the ETS. We continue to encourage scrapping APD and remain of the view that British travellers should not be penalised by a form of double taxation.

ABTA believes that APD should be replaced with a per plane duty (PPD) - a fair tax based on efficiency of aircraft and more closely aligned to the distance travelled. We are also concerned that passengers who pay for a few extra inches of legroom are considered to be premium class passengers and pay the same APD rate as those enjoying a flat bed.

ABTA has expressed great concern that the APD bands based on the distance from London to the capital city are illogical from an environmental perspective and would put off travellers to destinations such as the Caribbean and Kenya, whose economies are extremely dependent upon tourism. APD also has an impact upon incoming visitors to the UK which might make them go elsewhere and not visit the UK at all.

In response to the 6 December 2011 announcement, we have expressed great disappointment that the Treasury hasn’t taken the opportunity to move to two bands or to include premium economy type seats in the reduced rate. Despite what has been a comprehensive and persuasive case being made for reform, the decision to do nothing seems curiously at odds with the evidence presented to the Treasury and indeed the evidence the Treasury presented in its own consultation document in March.

ABTA will continue its work with the A Fair Tax on Flying alliance in the coming months.

Last updated: 13 January 2012