The UK charter industry faces a competitive disadvantage, says the online booking networkPrivate jet charter network, PrivateFly.com, estimates that £4.6 million of potential revenues from the new extension of Air Passenger Duty (APD) to business jets will be lost in the first year. The tax, which came into force on 1 April 2013, applies to business aviation flights departing from the UK, regardless of the aircraft's country of origin. According to PrivateFly, many operators of aircraft based outside the UK will be unlikely to pay up.
PrivateFly used flight activity analysis from industry data provider WINGX-Advance.com to estimate the annual revenue potential from APD on business jet flights at £9.3 million. The company says half of this potential revenue will be payable from UK-based operators or owners, with the remaining 50 per cent from non-domiciled aircraft - on their UK flight departures. PrivateFly forecasts that most of these overseas operators will not pay, resulting in the £4.6 million loss.
Adam Twidell, CEO of PrivateFly, comments as follows: "The collection process for APD on business aviation was not properly discussed with the industry, with HMRC applying the same logic for airlines to the highly fragmented private jet sector. However, the makeup of the private jet industry is very different to that of the airlines: While there are around 130 airlines operating UK departures, in 2012 over 3,000 private jet companies flew into the UK, with 75 per cent having less than three aircraft in their fleet. Routes are not scheduled and the aircraft behave like taxis.
"With the onus being on the aircraft operator to register and pay APD independently, the system is bureaucratic and difficult to understand for small private jet companies who only fly to and from the UK occasionally. The result will be many aircraft operators ignoring the tax. And with private aircraft able to use over 300 airports in the UK, the task of tracking down non-payers will be almost impossible for HMRC.
"Many will escape their scrutiny, creating a commercial disadvantage for UK operators who must factor in the costs of paying and administering the tax.
"HMRC have already confirmed that APD on the private jet industry is expected to be a 'revenue-neutral' exercise based on projected costs of £2 to £3 million, so they appear to be resigned to much of their potential revenue going uncollected.
"It is a political stunt that is increasing red tape and is handicapping UK aviation companies already struggling to compete against low-cost overseas competition. The simple solution for HMRC is to enforce payment of private jet APD with landing fees at UK airports."