Transit time does matter - specifically whether or not you spend more than 24 hours at a transit point.
Reading the advice from HMRC, if one flies London-Madrid on 1 December, spends more than a scheduled 24h in Madrid (24h and 1 minute will suffice) and then flies onto Rio de Janeiro in Brazil, then the 2 flights are not treated as connected, and one need pay APD only for the London-Madrid flight, and not the APD for London-Brazil.
True- something I've tried to use to my advantage a few times (via a multi-destination search) but never quite managed to make work.
I believe that it has something to do with ICAO regulations. Any flight connection where there are less than 24 hours between the scheduled arrival time of the first flight and the scheduled departure time of the second flight is technically classed as a transfer. A connection of over 24 hours is classed as a stopover. A trip which involves a transfer is classed as one journey, made up of two (or more) flights. Where a trip involves a stopover, each flight is treated as an independent journey, even where they are booked on the same itinerary. For example, if I fly MAN-AMS-DXB with a 23hr59min connection in AMS, I can buy duty free in MAN as my final destination is outside of the EU. If the connection between flights is 24hrs01min, I can't. I believe that it is this distinction which underpins HMRC's advice on the issue.
There are two problems when it comes to exploiting this principal to avoid UK APD. First of all, some airlines charge a premium for slotting a stopover into an itinerary, wiping out any savings derived from avoiding UK APD (AF/KLM are particularly bad in this regard; LH and LX are much better).
Secondly, if you're going to spend 24 hours in an intermediate city, you're going to have to pay for food, airport transfers and a hotel. You'll also have to pay the local equivalent of APD upon departure. These additional expenses tend to mitigate any savings which have been gleaned by not paying full APD (and that's before considering whether the added complexity, time and inconvenience make a stopover worthwhile). The only scenario that can think of where it would be worthwhile for financial reasons is where one connects from short haul economy class to long haul business of first.