Flybe confirms time to pay arrangement over £10m APD tax arrears
17 Jan 2020
Flybe has rejected claims that it owed HMRC over a £100m in airline passenger duty (APD) arrears, stating that the unpaid tax is closer to £10m
17 Jan 2020
The airline has now confirmed that it owes HMRC around £10m in outstanding APD payments and has agreed a time to pay arrangement with HMRC.
The government intervened earlier this week when the airline was teetering on the edge of insolvency and immediately called for a Treasury review of APD, which is set to be completed before Budget 2020 on 11 March.
The intervention has been heavily criticised by competitor airlines operating UK regional flights, including British Airways and Ryanair, which have described the lenient position on the APD payment as equivalent to unfair state aid.
Flybe is looking for an injection of capital to keep the business going and is understood to have secured up to £30m from its current owners, a consortium which includes Delta Airlines and Virgin Atlantic.
Time to pay arrangements are the standard method of renegotiating HMRC debt.
Under usual circumstances, when a company owes tax, it needs to negotiate a time to pay arrangement with HMRC which is negotiated on a case-by-case basis.
An HMRC spokesperson told Accountancy Daily: 'This enables the business to pay everything that it owes through a payment plan, and return to a stable financial footing, paying its tax on time.'
At the end of 2018-19, HMRC had more than 700,000 time to pay arrangements in place to support taxpayers who were unable to pay their tax bills.
APD tax is paid on all tickets bought by passengers flying on any flight departing and returning to the UK. The payment is made directly to the airline by a passenger when a ticket is purchased and then the airline has to pay the tax to HMRC so it is possible to build up an arrears. Due to confidentiality, HMRC cannot comment on individual cases.
For a single domestic flight, the APD rate is £13 for economy, and £26 for business/first class tickets. Effectively this means that any internal return flight is taxed £26 per passenger for economy travellers. The rate has been frozen since Budget 2018.