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Treasury confirms tax changes announced in Autumn Statement

9th December, 2011

Following the announcement in the Autumn Statement, the Treasury has now confirmed, in its response to the Air Passenger Duty consultation, that APD rates will rise in line with inflation from April 2012. The new rates were set out in full in the Treasury document.

The response also set out the details of a new duty to be levied on business jets over 5.7 tonnes from April 2013. All flights on aircraft under 20 tonnes or with 19 seats or more will be subject to the same distance banding structure and rates of APD that apply to passengers taking commercial flights, with the distance between rows of seats determining whether the higher or lower rate is charged. For aircraft of 20 tonnes or more, with fewer than 19 seats (those providing a premium service), duty rates equivalent to double the ‘standard’ APD rate (ie the higher rate) in each respective distance band will apply.

In response to calls from the aviation industry for APD to be dropped once airlines enter the EU Emissions Trading System, the Treasury document states:

“The EU ETS represents an important first step in Europe’s collective ambition to tackle global emissions from a broad range of carbon intensive industries. The Government believes that co-ordinated action of this sort represents a sensible approach to combating climate change without damaging growth in the UK and the world economy.

“The Government has been clear that APD is primarily a revenue-raising duty which makes an important contribution to the public finances, whilst also giving rise to secondary environmental benefits. Furthermore, VAT is not applied to flights and aviation fuel for commercial flights is not taxed.”

AEF has consistently called for APD rates to be increased, has argued that the tax should be unaffected by the introduction of the EU ETS, and has highlighted the exemption for business jets, which are highly polluting in terms of CO2 emissions.