“We urge joint working by the UK and Scottish governments on connected flights to avoid travellers facing double taxation"

Governments must co-operate to avoid double taxation risk to air passengers

Governments must co-operate to avoid double taxation risk to air passengers

The Chartered Institute of Taxation (CIOT) has urged the UK and Scottish governments to work together on changes to flight taxes to prevent passengers facing double taxation, which could lead to higher fares.

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

The tax body is particularly concerned that the UK and Scottish governments may adopt different approaches to connected flights. If the Scottish Government decides to take a different approach to the UK in terms of deciding what counts as a connected flight, passengers could be hit with double taxation.

John Cullinane, CIOT’s Tax Policy Director, 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.”

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

The 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 say 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 (£13 APD assuming 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 say Australia, then APD is charged on the whole journey from the UK to Australia, which would lead to a higher tax charge (£73 APD assuming lowest class of travel).

A change to the rules as a result of the devolution of APD to Scotland could potentially lead to disagreements between the governments. Take an example of a flight from Edinburgh to Sydney, via London Heathrow. Under Scottish rules, the flights might be connected, meaning Scotland can charge their APD on the whole journey from Edinburgh to Sydney (£73, if the rates are the same). Under UK rules the flight from Edinburgh to Heathrow, might not count as connected, so the UK can charge UK APD on the flight from Heathrow to Sydney (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 CIOT will continue to contribute to discussions, for example through the APD Stakeholder Forum which is run by the Scottish Government.

Notes for editors

1              The CIOT’s submission to the Scottish Government can be viewed here.

2              In the Programme for Government 2015-16 (PfG) the Scottish Government announced that it will reduce the burden of APD in Scotland by 50 per cent by the end of the next Scottish Parliament (2021), with the reduction beginning when a Scottish replacement to APD is introduced in April 2018. The Scottish Government plans to abolish the tax completely when resources allow, to help achieve the Scottish Government’s objective of boosting Scotland’s international air connectivity.

3              The Scottish Parliament does not have the ability to legislate for a tax charged on the carriage of air freight.

4              The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 17,600 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk (Out of hours contact: George Crozier, 07740 477 374)