To support the self-employed through the coronavirus outbreak the Government has introduced the Self-Employment Income Support Scheme (SEISS).
Air passenger duty (APD) is charged on all passenger flights from UK airports. The rate of duty varies according to passenger destination and the class of passenger travel. APD is estimated to raise £3.7 billion in 2018/19.
In recent years travel organisations and airlines have campaigned consistently for APD to be scrapped, though Ministers have opposed cutting duty rates or abolishing the tax on grounds of cost. The last major reform to the tax was announced by the then Chancellor George Osborne in his 2014 Budget. Since April 2015 the rates of APD have been charged by reference to 2 bands: Band A for short haul flights, and Band B for all long haul flights. Mr Osborne also announced that the higher rates of duty for flights on private jets would be substantially increased. Subsequently in his Autumn Statement that year the Chancellor announced that APD on economy flights would be scrapped for children in two stages: first, from 1 May 2015 for children under 12, and then from 1 March 2016 for children under 16. No further changes have been made to the structure of APD since then.
Some industry stakeholders have argued that the excess capacity seen at airports in London and the South East could be tackled by charging lower rates of APD for flights from regional airports. The Coalition Government considered this option as part of a review of the tax during 2011, but decided against it. In a report on aviation strategy published in May 2013, the Transport Select Committee recommended the Government review the case for a differentiated APD rate. Citing analysis by HM Revenue & Customs, published in October 20102, the Government took the view that it was unlikely that a new rate structure would be of significant help.
The case for having a differentiated APD rate has been raised more recently in the context of devolution.
First, in July 2012 the Northern Ireland Assembly was given powers to set APD rates on direct long-haul flights, and subsequently the Northern Ireland Executive introduced provisions to set these rates to zero from 1 January 2013. Second, in September 2014, the cross-party Smith Commission recommended the devolution of APD to the Scottish Parliament, and provision to do this was made by the Scotland Act 2016. Initially it was anticipated that APD would be devolved from April 2018. Over 2016 the Scottish Government consulted on the design of a replacement Scottish Air Departure Tax and confirmed plans to cut this tax by 50% by the end of the next Scottish Parliament, and abolish it completely when resources allowed. However, in October 2017 the Scottish Government announced it would postpone this reform, and to date there is no fixed date for the introduction of the new tax. Third, in February 2015, as part of the St David’s Day Agreement on the future of devolution in Wales, the Government announced it would consider the case for devolving APD to the Welsh Assembly, although in September 2016 the Government confirmed it would not take this forward, on the grounds that it would create undue market distortions.
Over this period regional airports in England have expressed concerns that lower APD rates in Scotland or Wales would put them at a significant competitive disadvantage, and in February 2015 the Chancellor announced that the Government would review potential options to support regional airports affected by devolution. Following the General Election the Conservative Government presented its first Budget on 8 July, and at this time it published a discussion paper on this issue, looking at three possible options: devolving APD within England, varying APD rates within England; and, providing aid to regional airports within England. However, any of these options would have to comply with EU rules on aviation, State aid and tax devolution. Following the outcome of the EU referendum, in November 2016 the Government confirmed that it would not take specific measures at this point, but would “review this area again after the UK has exited from the EU.”
Further to this, in the Autumn 2017 Budget the Government announced that it would “publish a call for evidence which will consider the impact of VAT and air passenger duty (APD) on tourism in Northern Ireland, to report at Budget 2018.” In 2014 the Irish Government abolished Ireland’s version of APD – the ‘Air Travel Tax’ – and there have been concerns that the tourist industry in Northern Ireland has been particularly affected by this, and by the lower 9% VAT rate in Ireland which applies to a number of tourism related goods and services. This consultation exercise was launched on 13 March, and the deadline for responses was 5 June; this noted that responses to the consultation would “inform future policy development but the government has made no firm decisions about the issues set out in this document.” In the 2018 Budget the Government announced that there would be “no changes to the VAT or APD regimes in Northern Ireland at this time” but that it would “continue to explore ways to support a successful and growing tourism industry (Budget 2018, HC 1629, October 2018 para 4.113).
Further information on the development of APD since its introduction in 1994 is provided in three Commons Briefing Papers:
- Air Passenger Duty : introduction, CBP413, 6 December 2018
- Air Passenger Duty : the approach of the Labour Government (2008-2010), CBP6426, 19 September 2012
- Air Passenger Duty : recent debates and reform, SN5094, 8 July 2018.
The wider policy issues affecting airports in the UK, outside London and the South East of England, are examined in, Regional airports, Commons Briefing paper CBP323, 26 April 2016.
 HC Deb 3 December 2014 c312
 Modelling the Effects of Price Differentials at UK Airports, HMRC Research Report 188, October 2012
 Under the Air Passenger Duty (Setting of Rate) Act (Northern Ireland) 2012.
 HM Government, Powers for a purpose: towards a lasting devolution settlement for Wales, Cm 9020, February 2015 para 4.13
 For example see, Transport Committee, Smaller airports, HC 713 of 2014-15, 13 March 2015 pp8-9
 HM Treasury press notice, Speech by the Chancellor, George Osborne: Our long term economic plan for the North East, 27 February 2015
 HM Treasury, Discussion paper on options for supporting English regional airports from the impacts of air passenger duty devolution, July 2015. The issue was the subject of a Westminster Hall debate later that year (HC Deb 20 October 2015 cc297-320WH).
 Autumn Statement, Cm 9362, November 2016 para 4.37 A summary of responses to the discussion paper were published at this time.
 see, Northern Ireland Affairs Committee, Promoting the tourism industry in Northern Ireland through the tax system, HC 50, 20 March 2018
 HMT, VAT, Air Passenger Duty and tourism in Northern Ireland: call for evidence, March 2018 para 1.8. see also, PQ136109, 23 April 2018.
This note gives a short introduction to the way VAT works, and the significance of EU VAT law for setting VAT rates, before discussing the campaign for a lower VAT rate on tourist services and the Government's introduction of a temporary 5% rate in July 2020.
This note sets out the rules regarding the tax treatment of alcohol and tobacco purchases made by passengers, and sets out proposals the Government has published for reforming these rules in the context of Brexit, and the UK’s departure from the EU single market.