Domestic air passenger duty rates may be cut

The government is considering cutting the rate of air passenger duty for internal flights to boost growth and improve connectivity

This is part of a wider review of the UK aviation system and the government has also announced that it is finalising the details of a wider consultation on aviation tax reform, which is due to be published in spring 2021. It is not clear whether the consultation will be pubilshed on 23 March on the new Tax Day, which has been earmarked by the Treasury as a single release day for tax consultations.

The consultation will include options to change the air passenger duty (APD) treatment for domestic flights, such as reintroducing a return-leg exemption or the creation of a new lower domestic rate. The current standard rate is £13 for any Band A flight in economy class which affects all internal flights.

In addition to looking at the case for increasing the number of international distance bands, the plan is to continue to decarbonise domestic aviation as part of the UK ambition to reach net-zero, including through mandating the use of sustainable aviation fuels. All domestic aviation emissions are captured in carbon budgets.

The prime minister Boris Johnson said: ‘I want to cut passenger duty on domestic flights so we can support connectivity across the country. It seems wrong that someone flying from Belfast to London pays more tax than someone flying from Dublin to London.’

Airport Operators Association chief executive Karen Dee said: ‘The recognition of the detrimental impact of Air Passenger Duty and a commitment to review domestic APD to reduce its impact is very welcome. Domestic aviation suffered a double-hit in the last year, with the collapse of Flybe and the COVID-19 pandemic, and this offers a glimmer of hope for the future.’

The government is likely to come under pressure from environmental groups who will see the u-turn on rates as a negative move when the UK has set out plans to achieve net-zero emissions by 2050.

The announcement to cut air passenger duty came in the interim report by Sir Peter Hendy which is examining Union connectivity. The report marks a key step in looking at whether and how connectivity across the UK can be improved in order to support the government’s aim to build a stronger and fairer economy for the future.

To support this, the government has set aside £20m development funding to begin assessing options on road and rail schemes which have been identified by the interim Hendy review as crucial for cross-border connectivity.

To achieve the aim of better connecting the UK, the report has considered the creation of a new UK strategic transport network that will allow people and commerce to move freely by road, rail, sea and air, to improve regional connectivity.

‘This network of improved routes would form the transport spine of the country, facilitating quicker and easier travel and trade between all corners of this country, levelling up communities and maximising national potential,’ the Department of Transport statement said.

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