Double APD warning issued over Scotland devolution

Double APD warning issued over Scotland devolution

The UK and Scottish governments are being urged to work together on changes to flight taxes to prevent passengers facing double taxation, which could lead to higher fares.

The Chartered Institute of Taxation (CIOT) has told the government in Scotland that when Air Passenger Duty is devolved in 2018 it is sensible for the Scottish version to be similar to the UK’s relatively simple APD for ease of cross-border working.

The tax body says it is particularly concerned that the UK and Scottish governments may adopt different approaches to connected flights.

If Scotland decides to take a different approach to the rest of the UK in terms of deciding what counts as a connected flight, passengers could be hit with double taxation.

CIOT tax policy director, John Cullinane, said: “It would help people operating the tax, if the Scottish version operates in a similar manner to the UK’s APD. UK APD is not without its complexity but is fairly straightforward for the industry to operate and arguably a simple tax by comparison with other taxes in general.

“We urge joint working by the UK and Scottish governments on connected flights to avoid travellers facing double taxation and the risk that this extra cost will eventually be added on to the cost of flights by the industry.”

Connected flights rules currently drive some passenger behaviour. For example, people may choose to use hubs outside the UK, and ensure their ongoing flight from Paris or Amsterdam does not count as a connected flight for their journey. This means they only pay APD from the UK to the hub, such as Paris, of £13 for the lowest class of travel.

However, if they unwittingly arranged the travel in a way that made the flights connected, and they are going on to Australia, then APD is charged on the whole journey from the UK to Australia, which would lead to a higher tax charge of £73 assuming the lowest class of travel, according to CIOT.

A change to the rules as a result of the devolution of APD to Scotland could potentially lead to disagreements between the governments, the body warned.

CIOT cited a flight from Edinburgh to Sydney, via Heathrow as an example. Under Scottish rules, the flights might be connected, meaning Scotland can charge its APD on the whole journey from Edinburgh to Sydney of £73, if the rates are the same.

However, under UK rules the flight from Edinburgh to Heathrow might not count as connected, so the UK can charge UK APD on the sector from Heathrow to Sydney of another £73.

This scenario would mean the passenger is paying two amounts of tax on part of their journey – effectively doubling the APD liability to £146.

The APD is an excise duty and the amount due is dependent on the final destination and class of travel of the passenger. The tax raised more than £300 million for Scotland in the last financial year.


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