Bizav fights UK private jet tax

 - May 1, 2011, 9:40 AM

The UK business aviation lobby has launched a vigorous campaign to convince the British government that its plans to extend the existing airline passenger duty (APD) to private aviation are discriminatory and disproportionate. The British Business & General Aviation Association (BBGA) has joined forces with the British Helicopter Association (BHA) to demand urgent meetings with UK Treasury officials to draw attention to what they say are false assumptions contained in the consultation document presented by the government on March 22. The groups have the backing of the European Business Aviation Association (EBAA).

One of the key arguments against the tax will be that it is anti-competitive in that one of the anticipated outcomes will be to encourage travelers to abandon business aircraft use and return to airline service. The UK Treasury’s consultation document shows that it consulted only with airline interests in drafting the outline proposals. The BBGA will point out that business aviation often flies passengers between destinations that are not served by the airlines, meaning that these people have no viable alternative. The new tax would apply to all aircraft weighing more than 5.7 metric tons (12,566 pounds).

According to EBAA president and CEO Brian Humphries, who is also chairman of the BHA, the British government’s proposals are contrary to requirements of the UN-backed International Civil Aviation Organization that member states should not introduce new aviation taxes unilaterally without at least first informing ICAO. However, the UK, as part of the European Union, has already shown a willingness to act unilaterally without ICAO backing by extending the emissions trading scheme to aviation. The UK government is now saying that the APD, and its proposed extension of this to private aviation, is needed as an additional measure to reduce air transport’s impact on the environment.

One of the main questions left unanswered by the consultation document on the extension of APD is whether this would apply purely to passengers taking commercial charter flights or to anyone traveling on any form of business aviation regardless of whether the operation was flown for hire. The UK Treasury has said that the scope of the tax is still to be determined but has indicated a willingness to remove the current APD’s exemption for passengers “not carried for reward.”

The government is proposing to levy APD at the highest current rate of £186 ($298), which applies to business- and first-class tickets for flights longer than 6,000 miles. This rate would apply regardless of how short a flight was taken in the business aircraft, including 20-minute helicopter transfers from London-area airports to the heliport at Battersea.

Oil companies have also joined the protest against the extension of APD. If the tax is applied to helicopter shuttle flights to and from North Sea exploration and production platforms, they could end up paying almost $600 in taxes for each worker beginning and ending an offshore shift.

Also vulnerable would be the scheduled helicopter service that connects the Scilly Isles with the UK mainland. The operator of this service has informed BHA that it would have to cease flying if the tax is applied to these flights.

EBAA has indicated that the UK business aviation industry does not necessarily oppose the principal that passengers directly paying for flights in business aircraft should be subject to some form of APD–bringing them into line with airline passengers in the UK. “The goal is to make it equitable and it certainly isn’t that now [based on the consultation paper],” Humphries told AIN.

In fact, in the consultation paper, the UK Treasury acknowledges that there could be a case for several categories of private aviation, such as emergency medical flights, to be exempt from the proposed APD. It also indicates that some accommodation could have to be made for structuring the tax in different ways depending on whether a flight is commercial or private. A wider consultation is considering the whole future of the APD as it applies to airlines, and the government has outlined several options that would see the duty levied at rates lower than those currently charged.

The UK Treasury believes that a tax on private aviation would apply to approximately 80,000 to 90,000 flights per year, raising as much as £3 million ($4.8 million). It has estimated that business aircraft operators might face costs of between £250 ($400) and £7,000 ($11,200) to set up the mechanisms for collecting the tax, and then ongoing annual administrative costs of around £5,000 ($8,000).

Read a blog on the so-called “Learjet Levy” at www.ainonline.com/ain-blogs.