Overseas operators of business jets will refuse to pay air passenger duty, leading to a £4.6 million shortfall for the government, claims UK-based private jet charter network PrivateFly.
As a result, the extension of APD to business jets last month will raise only half the amount expected, said CEO Adam Twidell, who is calling for the tax office to insist APD for private jets is paid with landing fees instead.
"Her Majesty’s Revenue and Customs have already confirmed that APD on the private jet industry is expected to be a ‘revenue-neutral’ exercise based on projected costs of £2 million to £3 million, so they appear to be resigned to much of their potential revenue going uncollected," he said.
"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."
PrivateFly claimed most operators of aircraft based outside the UK would be unlikely to pay APD voluntarily, leaving HMRC to chase 3,000 different companies – many of whom will only have one flight a year from the UK.
"The man hours required by HMRC to track down and collect the revenue will realistically mean it will be very easy for flights liable for APD to slip through the cracks," said a PrivateFly spokesman.
"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," added Twidell.
"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."
