APD was introduced in 1994 as a tax to pay for the environmental costs of air travel. Further to its introduction in 1994, successive governments have modified the rates, bands and countries to which APD is applicable.
As of 1st April 2015, two travel bands were introduced, Band A which covers short-haul flights (<2000 miles) and Band B which covers long-haul flights (>2000 miles).
There are three rates of duty for each band, determined by the class of travel which takes comfort, service, privacy and amenities into account. Essentially these are Reduced Rate (Economy), Standard Rate (Business & First) & Higher Rate (Private Jet).
Current rates can be found on the HMRC website.
APD is levied against each adult passenger on every flight departing from the UK (excluding Northern Ireland and the Scottish Highlands) – it doesn’t apply if you’re flying back into the UK. APD is not applicable to passengers transiting through the UK – as long as the time between flights is less than 24 hours. Children aged two years old without a seat booking are exempt from APD regardless of the class they are travelling in. Children under 16 years old are exempt from APD on economy class travel only.
Whilst the principal of APD was not rejected by ITM members, the increases are causing significant concern regarding increased costs to travel programmes. Furthermore, ITM remains concerned that the significant revenues generated by APD are not in any way hypothecated into environmental or aviation infrastructure, instead simply going into general Treasury funds.
ITM has openly supported A Fair Tax on Flying campaign. An alliance of more than 30 leading travel organisations who believe that APD is now too high and that it isnegatively impacting the economic competitiveness of the UK. The campaign is calling on the Treasury to freeze APD pending commissioning a comprehensive study into thefull economic effects of aviation tax in the UK, including its impact on employment.
In 2013 a study by PwC, 'The Economic Impact of Air Passenger Duty', found that abolition of APD could provide an initial short-term boost to the level of UK GDP of around 0.45 % in the first 12 months, averaging at just under 0.3 % per annum between 2013 and 2015. It stated that this increase would permanently raise UK economic output, to the point where the economy could be up to £16bn larger in the period 2013-15 than under the current system of APD.
Concern is also expressed regarding the variation in APD throughout the UK. In 2011 Band B of APD was abolished for all flights from Northern Ireland, creating a single Band where subject to the same lower rate. APD does not apply to flights departing from the Highlands and Islands of Scotland and as part of fiscal devolution to Scotland, the Scottish APD forum was established in 2015 making a commitment to cut APD by 50%; as of January 2019, this has not been realised and it remains in line with England.
The Board of Airline Representatives in the UK (BAR UK) has challenged the government to use the debate in Scotland and NI to review the tax and introduce a fairer version for the whole of the UK to enable an internationally and competitive UK aviation sector and facilitate growth in the wider economy. This is seen as increasingly important as the UK prepares to exit the EU. http://www.bar-uk.org/campaigns/apd/
[Feb 2019 – Matthew Bell]