Time to charge VAT on new aircraft
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Time to charge VAT on new aircraft
OK, this is NOT my idea, but it is a long-held, but seemingly never challenged policy of environmental groups like Friends of the Earth.
My experience in other social media suggests that they don't want to engage in any kind of logical debate on this matter, they just trot out the same line ad-nauseum.
So, can anyone please give me a good reason why it would be a good policy move to charge VAT on new aircraft, considering:
-The rate of fleet renewal in the airline industry is vastly slower than it is for personal or business cars, therefore there should be every incentive possible for airlines to invest in new machines.
-How exactly would VAT be levied, when airlines would either claim it back, or move their country of registration elsewhere?
Answers on a recycled postcard please....
My experience in other social media suggests that they don't want to engage in any kind of logical debate on this matter, they just trot out the same line ad-nauseum.
So, can anyone please give me a good reason why it would be a good policy move to charge VAT on new aircraft, considering:
-The rate of fleet renewal in the airline industry is vastly slower than it is for personal or business cars, therefore there should be every incentive possible for airlines to invest in new machines.
-How exactly would VAT be levied, when airlines would either claim it back, or move their country of registration elsewhere?
Answers on a recycled postcard please....
Silly suggestion as it takes 30 seconds to get around it.
Airline uses subsidary company and buys aircraft in country with no VAT and leases them to Airline.
No VAT paid to Govt and aircraft then registered in another country so no registration fees accrue to CAA or what ever national body is relevant.
Airline uses subsidary company and buys aircraft in country with no VAT and leases them to Airline.
No VAT paid to Govt and aircraft then registered in another country so no registration fees accrue to CAA or what ever national body is relevant.
Vat is only paid by non-registered companies/individuals, so the question is irrelevant if discussing commercial aircraft. As to light aircraft, another forum would be a more relevant place to ask the question. 
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racedo and Lg..
These are exactly the same answers I have tried putting to the likes of FoE, Green Party etc, and they either go quiet, ignore you, or say they aren't an accountant if you are lucky.
I was not talking about private aircraft, whose users afaik pay VAT and duty on avgas just like car drivers?
Their bone of contention is that the aviation industry is 'subsidised' to the tune of £10bn per year, but again, when you ask for a breakdown of this figure, it falls apart.
Much of the claim hinges on there being no VAT on fuel (they've never heard of the Chicago Convention, they don't get the concept that it is a cross-border business), and that passengers get 'subsidised' duty free (have they shopped in airports lately - obviously not, all those eco-tourism types take the train to Peru, don't they).
The concept that a product or service not being subject to VAT is still not subsidised is alien to them - we'll stay quiet about food being doubly subsidised via the CAP and not being levied VAT then!
These are exactly the same answers I have tried putting to the likes of FoE, Green Party etc, and they either go quiet, ignore you, or say they aren't an accountant if you are lucky.
I was not talking about private aircraft, whose users afaik pay VAT and duty on avgas just like car drivers?
Their bone of contention is that the aviation industry is 'subsidised' to the tune of £10bn per year, but again, when you ask for a breakdown of this figure, it falls apart.
Much of the claim hinges on there being no VAT on fuel (they've never heard of the Chicago Convention, they don't get the concept that it is a cross-border business), and that passengers get 'subsidised' duty free (have they shopped in airports lately - obviously not, all those eco-tourism types take the train to Peru, don't they).
The concept that a product or service not being subject to VAT is still not subsidised is alien to them - we'll stay quiet about food being doubly subsidised via the CAP and not being levied VAT then!
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They would simply claim it back as I'm sure they will already all be VAT registered. A complete wast of time and paperwork!
VAT is only a tax on non VAT registerd individuals and small businesses, it has zero effect on larger companies.
VAT is only a tax on non VAT registerd individuals and small businesses, it has zero effect on larger companies.
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Err, within the EU, any fares involving any public transport carrying vehicle, capable of carrying more than 10 pax must be zero rated for vat. That would seem to encompass most airliners operating for airlines, so charging vat on the aircraft purchase would mean that this would become an additional capital cost to the aircraft purchaser/lessee, which would have to be added to fares as a cost before vat or absorped (ie reduce profit/increase loss). To suggest it is neutral is without understanding the vat system.
If vat was not zero-rated on fares, that would increase fares sold in UK by 20%.
Of course, Greenpeace fail to mention that air transport is in exactly the same position of any other public transport operator within Europe (including trains, buses, ferries, lake-steamers, cable-cars, etc. etc.)where the vehicle can carry 10 or more persons, so there is a true level playing field.
As to the JET A (or AVTUR to HMRC) discussion, in the UK, nearly all kerosene is supplied duty free unless it's used to power a road going vehicle (not many of those about). The bulk of non aviation use is for heating oil, mostly for domestic use, where most of it only attracts 5% vat. Something else the greens forget.
If vat was not zero-rated on fares, that would increase fares sold in UK by 20%.
Of course, Greenpeace fail to mention that air transport is in exactly the same position of any other public transport operator within Europe (including trains, buses, ferries, lake-steamers, cable-cars, etc. etc.)where the vehicle can carry 10 or more persons, so there is a true level playing field.
As to the JET A (or AVTUR to HMRC) discussion, in the UK, nearly all kerosene is supplied duty free unless it's used to power a road going vehicle (not many of those about). The bulk of non aviation use is for heating oil, mostly for domestic use, where most of it only attracts 5% vat. Something else the greens forget.
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Hipennine. From the HMRC website:
If you sell zero-rated goods or services, you can generally reclaim VAT on any purchases that relate to those sales.
Please delete your post, it's only adding to further confusion and is simply wrong.
If you sell zero-rated goods or services, you can generally reclaim VAT on any purchases that relate to those sales.
Please delete your post, it's only adding to further confusion and is simply wrong.
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FANS, Apologies, that is correct, but that does therefore mean what on earth is the point in charging vat on new aircraft, because it is then tax revenue neutral (it is not neutral to the purchaser because they have an additional cash-flow cost of financing the vat payment before the reclaim, and having to account for it - any business that cannot "charge" vat, is financing the reclaimable vat for the best part of 3 months). Nor does it alter the fact that all forms of public pax transport are in the same boat (sic).
Wading through the specific notice on vat and public pax transport an interesting question has occrred in my mind however:
Given the approach of some Locos in seperating out charges for luggage, airport check-in etc. - should these charges incur vat ? The vat guidance seems to suggest that any goods or service which is provided as incidental to the main service (ie carrying the pax) has to to be included in the base fare for it to be zero rated. The regs and guidance seem to have been written before loco, because there are specific examples - ie food and refreshement and the like is zero rated if included in the fare, but not if charged seperately. Now, in addition to food and refreshments, for the locos all the other services are no longer part of the base fare, should vat be applied, or does this open the opportunity for a clever consumer lawyer to challenge the charging for such services on the basisi that HMRC treats them as part of the base service ?
Wading through the specific notice on vat and public pax transport an interesting question has occrred in my mind however:
Given the approach of some Locos in seperating out charges for luggage, airport check-in etc. - should these charges incur vat ? The vat guidance seems to suggest that any goods or service which is provided as incidental to the main service (ie carrying the pax) has to to be included in the base fare for it to be zero rated. The regs and guidance seem to have been written before loco, because there are specific examples - ie food and refreshement and the like is zero rated if included in the fare, but not if charged seperately. Now, in addition to food and refreshments, for the locos all the other services are no longer part of the base fare, should vat be applied, or does this open the opportunity for a clever consumer lawyer to challenge the charging for such services on the basisi that HMRC treats them as part of the base service ?
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HP,
I posted the question because I have tried engaging in dialogue with the green groups that are suggesting this measure, and they don't have the decency to reply.
I was wondering if anyone within the industry could explain the rationale for such a move, even if they din't agree with it.
Exactly as I suspected, the response is that such a move would be utterly pointless, as it would be claimed straight back.
I assume that other public transport companies use the same logic, and are VAT registered even if they don't collect it - although I assume train companies with onboard catering do?
'West Coast Trains Limited Registered in England and Wales No. 3007940. Registered Office The School House, 50 Brook Green, London, W6 7RR. VAT no. 672859095'
I'm sure they gladly handed over 17.5% VAT on all those shiny new (and often half empty) Pendolini!
Hipenine, you raise an interesting point about the extras, but if this was a valid line of attack, would the green groups have already tried it?
Transport of luggage is also a fare generating service, is it not? Postage is not vatable, how about for the likes of Fedex? Again, my understanding is that VAT cannot be applied to a service which is largely rendered outside the realms of Her Majesty's loyal governent - so that must exempt most additional charges, but not (airside) airport check-in? And whatabout domestic flights?
I was under the impression that the decision to charge VAT on domestic passenger services was a matter for each EU government, and that Italy and possibly Germany did charge VAT on flights?
I posted the question because I have tried engaging in dialogue with the green groups that are suggesting this measure, and they don't have the decency to reply.
I was wondering if anyone within the industry could explain the rationale for such a move, even if they din't agree with it.
Exactly as I suspected, the response is that such a move would be utterly pointless, as it would be claimed straight back.
I assume that other public transport companies use the same logic, and are VAT registered even if they don't collect it - although I assume train companies with onboard catering do?
'West Coast Trains Limited Registered in England and Wales No. 3007940. Registered Office The School House, 50 Brook Green, London, W6 7RR. VAT no. 672859095'
I'm sure they gladly handed over 17.5% VAT on all those shiny new (and often half empty) Pendolini!
Hipenine, you raise an interesting point about the extras, but if this was a valid line of attack, would the green groups have already tried it?
Transport of luggage is also a fare generating service, is it not? Postage is not vatable, how about for the likes of Fedex? Again, my understanding is that VAT cannot be applied to a service which is largely rendered outside the realms of Her Majesty's loyal governent - so that must exempt most additional charges, but not (airside) airport check-in? And whatabout domestic flights?
I was under the impression that the decision to charge VAT on domestic passenger services was a matter for each EU government, and that Italy and possibly Germany did charge VAT on flights?
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JB,
Postage is vat free when bought from the post office, but not when bought from 3rd party carriers. This has long been a bone of contention with parcel carriers who are competitively disadvantaged when the purchaser can't reclaim VAT. The Royal Mail is bizarrely exempt from all sorts of things - for eg fitting a tachograph to trucks. BTW, vat is currently 20% not 17.5%
Postage is vat free when bought from the post office, but not when bought from 3rd party carriers. This has long been a bone of contention with parcel carriers who are competitively disadvantaged when the purchaser can't reclaim VAT. The Royal Mail is bizarrely exempt from all sorts of things - for eg fitting a tachograph to trucks. BTW, vat is currently 20% not 17.5%
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What we’re saying is that with the current VAT legislation, VAT charged on aircraft would be simply claimed back, i.e. it’s merely a cashflow issue as you pay the VAT in month 1 and only reclaim it in month 3.
If however you want to add 20% to the purchase price and make this non-refundable, then this could be done, i.e. a new registration fee for UK registered airliners would be equivalent to 20%.
Don’t confuse the issue of taxing airliners with the details of VAT law.
Clearly, the UK would be left without any airlines if it was the only country to do this .
This is the whole problem with the green environment, they’ll tax countries like the UK/Europe which leads to major pollutants focusing their efforts overseas on production plants that don’t meet basic emissions targets! Net global effect = worse off ! This is my rant in relation to renewable energy!
If however you want to add 20% to the purchase price and make this non-refundable, then this could be done, i.e. a new registration fee for UK registered airliners would be equivalent to 20%.
Don’t confuse the issue of taxing airliners with the details of VAT law.
Clearly, the UK would be left without any airlines if it was the only country to do this .
This is the whole problem with the green environment, they’ll tax countries like the UK/Europe which leads to major pollutants focusing their efforts overseas on production plants that don’t meet basic emissions targets! Net global effect = worse off ! This is my rant in relation to renewable energy!
As a result of EU 'Open Skies' policy, if taxes were charged on aircraft registration, airlines would just re-register in another EU country. UK plc would lose out.
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HP - I was talking about when the sets were purchased, which would have been subject to 17.5% VAT, if it was applied. However, if ordered from another EU country, VAT number given and the merry go round of pay then reclaim would not be relevant anyway.
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Jaybird, Where have you been for the last few years? the previous UK government reduced VAT from 17.5% to 15%. The current coalition gov raised it to 20%. Now you propose charging the hard pressed UK passengers another 20% tax when they fly. The industry is already in a mes, add 20% tax to the fares and air travel will be finished for the normal man in the street, then TCX and one or two others will go bust.
Get a grip!
Get a grip!
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Ballsout - please re-read what I said, both at the top of the thread and in subsequent posts, namely:
1) The proposal is about VAT on aircraft - VAT on fares is a separate suggestion.
2) It is NOT my proposal, NOR do I agree with it. I was trying to understand the rationale of the green groups that DO support it.
3) My reference to VAT was on the purchase of new trains by Virgin, which was before the rate of VAT when down, then back up again and then up to 20%
1) The proposal is about VAT on aircraft - VAT on fares is a separate suggestion.
2) It is NOT my proposal, NOR do I agree with it. I was trying to understand the rationale of the green groups that DO support it.
3) My reference to VAT was on the purchase of new trains by Virgin, which was before the rate of VAT when down, then back up again and then up to 20%
