EC Takes UK to Task over Aircraft VAT Exemption

 - July 7, 2009, 12:05 PM

The UK government is considering a demand from the European Commission (EC) that it change its tax legislation to remove an exemption from value added tax (VAT) for privately operated aircraft weighing more than 8,000 kg (17,636 pounds). On June 25 the EC “formally requested” through a so-called “reasoned opinion” that Britain bring its VAT rules into line with those of the 27-state European Union. If the country fails to make the change within two months, meaning by August 25, the EC can take legal action through the European Court of Justice. A spokeswoman for the UK government’s Revenue and Customs department told AIN that it is “considering the position.” She acknowledged that current British VAT rules allow an exemption based entirely on aircraft weight, rather than specifying that the aircraft has to be operated commercially, as is the case with almost all other EU states. Revenue and Customs argues that the difference between the UK and EU positions is marginal in practice because “the majority of aircraft operators are VAT registered [and so] any VAT charged can normally be reclaimed.” The EC’s concern is that VAT-exempted aircraft imported into the UK could then be re-exported to another EU state at zero VAT.