Avtur and Avgas the future

[Fuji Abound]

Proposed scheme: Purchaser/user liable for payment of duty on Avtur used for private pleasure flying

2.15. The preferred option is that the responsibility for paying the duty due would lie with the purchaser and/or the user of the fuel, who would be required to make a declaration and pay duty to HMRC if the fuel were used for private pleasure flying. Avtur used for private flying would be taxed at the same rate as kerosene: currently 54.68 ppl.

2.16. All suppliers of Avtur are Registered Dealers in Controlled Oils (RDCO). As such, they have a duty of care when selling or delivering Avtur to ensure that they only make supplies to customers who have a legitimate use for the oil. Under this proposal the RDCO’s general duty of care would be extended slightly so that if he thought that the fuel might be used for private pleasure flying, then under his general duty of care, he would draw attention to the purchaser of the obligation to contact HMRC and pay the duty due. The RDCO would note his records accordingly.

2.17. There would be a small increased compliance burden on RDCOs to inform the purchaser of the duty liability and note his records accordingly.

2.18. There would be some additional HMRC administrative costs in devising and administering the payment scheme. There would also be increased assurance costs in following up payments for sales of possible private-use fuel as noted in RDCOs’ records.

These would seem to be the current proposals so far as Avtur is concerned.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ConsultationDocuments&propertyType=document&columns=1&id=HMCE_PROD1_027787

You can also read the proposals with regards Avgas.

The current proposal would seem to be the removal of the tax advantage to Avtur for "private leisure flying".

Interestingly this would seem to specifically exclude flight training (at least for PPLs). It is unclear whether CPL flight training would fall under the same category.

Moreover, the definition of "private leisure flying" seems unclear. If the aircraft is used for business (to visit a client or customer) is this considered "private leisure flying".

On a more esoteric point what is the purpose of duty on fuel - is it simply to raise tax, or is it intended to limit its use to protect the enviroment?

It occurs to me that at the rate we are going, and assuming that Avtur benefits from a lower duty for some time to come, a great many perfectly serviceable aircraft will become too expense to operate simply becasue of the cost of the fuel. Inevitably they will be scrapped. This is already true of many light twins. Given the very small contribution they make to the overall carbon footprint and the enviromental damage brought about by scrapping them and producing replacement "plastic" aircraft have we really thought this through? Moreover, the industry surrounding GA will equally suffer with wider implications for jobs and training. In contrast, such is the demand for cars, that one suspects a far more draconian imposition of tax would be required to achieve the same result.

Far too simplistic I know, but would be interested in others ocmments.

[Justiciar]

This is not surprising - governments never miss a trick for extracting money from the hard pressed tax payer. This proposal would seem to place a degree of responsibility on the Dealer but more importantly will be a recipe for tax avoidance. How many private pilots will contact HMRC every time they fill up with Avtur? Do they do this each time? Once every year?

They cannot of course just increase the duty across the board as those with real political clout, ie the airlines would plant a boot in Alastair Darling's backside :ok:, plus I believe the taxation of Avtur is subject to international treaty obligations. As usual another dog's breakfast of regulation is in prospect.

See thread below on related issue of aviation fuels.

http://www.pprune.org/forums/showthread.php?t=299782

[BackPacker]

Well, I somehow expected this.

Let's be realistic. ALL fuels, regardless of their purpose, are taxed in principle. In most cases, it's not just VAT but some sort of increase above and beyond that. Known under different names in different countries.

The one big exception relevant to us is fuel that is used up on international flights. Since the fuel is "exported" but never "imported", in principle you can claim back certain taxes paid.

For avgas, it already works this way. Pay the fuel tax, fly abroad, download the appropriate form and claim back tax.

For avtur, the governments of this world have taken a shortcut. As the far majority of flights performed on avtur are international and thus tax exempt, it would not make any sense to rig up a system where somebody collects the tax, sends it to the government and then the government pays back more than 99% of the tax received to the users once they reclaim the duty. The whole administrative system would be more expensive than the actual tax being collected.

But the landscape is changing. One factor is more and more private flights that do not cross any international border, flying on avtur. The other factor is the European Union and the Schengen treaty, which effectively makes most of Europe into one no-border zone, making it impossible to "morally" claim back taxes if your flight remains within Europe - after all, you're no longer crossing an "international" border anymore as long as you stay within Schengen. (By the way, this is exactly the same reason as why you can no longer buy duty-free liquor if your upcoming flight remains within the Schengen area.)

Commercial operators still benefit from a worldwide treaty (Chicago I think) that forbids governments to levy taxes on aviation fuels used on international flights but various political parties (at least here in NL) are already questioning whether they should continue to support that treaty. Once that's gone, all avtur usage will be taxed, not just for private flights but for everyone.

Obviously everything we feel in our pockets is in the short term a bad thing. But in the grand scheme of things, taxation of aviation fuels does level the playing field a bit more. A long-standing complaint from, for instance, the railways is that they have to pay the full price, including taxes, for their "fuel" (electricity), and they have to maintain all the infrastructure themselves too. With taxation of aviation fuels, train journeys for medium distances (up to 500 km) would become far more competitive against a plane journey.

(And that, of course, plays right into the hands of the environmentalists.)

Fortunately, even with tax added, avtur will be less expensive than avgas, because it is easier to refine and there are immense economies of scale. So I don't expect Mr. Thielert will be out of work anytime soon. (Well, at least not for this reason.)

[Fuji Abound]

Whilst I appreciate Avgas is produced in limited amounts never the less oil is priced in dollars, and althought the barrel price has nearly reached a $100 the dollar has substantially depreciated against the pound.

It is also interesting how the cost of fuel now breaks down.

http://newsimg.bbc.co.uk/media/images/44224000/gif/_44224327_petrol_price_203.gif

Clearly cars are making a significant contribution to the Exchequer and at least the motorists are getting something for it (more spped cameras I hear you cry),

on the other hand so is GA, I wonder what we get in return?

I always thought if anything it was AT, but even they say they are funded in some other way, or perhaps they just hate to think we pay their salaries one way or another.

[TheOddOne]

Proposed scheme: Purchaser/user liable for payment of duty on Avtur used for private pleasure flying


We have a fleet of aircraft, used for training and hire. On any given day, on one fill from the pumps, an aircraft can be used for:

Flight 1. Training flight for someone who wants a PPL purely for private/pleasure purposes.

Flight 2. Training flight for someone working towards a professional flying licence

Flight 3. Hire flight for someone taking colleagues to a business meeting, a private flight not pleasure, but strictly business. The cost of it will even be claimed against tax, quite legitimately.

How on EARTH could we possibly keep records reflecting the different tax we should pay on the fuel for each flight??????

TheOddOne

[soay]

I hope you guys took the opportunity to respond to the Energy Products Directive, before the closing date of 31st October! No point in bleating on about the proposed tax change here if you didn't.

[Fuji Abound]

Yes, I most certainly did.

Mind you the trouble with all these public consultations is so many people dont know they are taking place or what is going on - that is the value of keeping such issues in front of everyone on forums such as this .. .. ..

.. .. .. and even more to the point as means of often identifying how daft some of the proposals are.

[soay]

I trust it was better reasoned than a submission that I read in another place (http://forums.flyer.co.uk/viewtopic.php?t=35485&postdays=0&postorder=asc&start=30):
Jet (or Turbine) engines are simple in their design, but do rely on the use of large amounts of fuel to run. The helicopter that I fly – as an example – uses around 28 USG per hour. The proposal as it stands will more than double the fuel cost per hour for any private trips I undertake. In effect, this will increase my costs by around £57 per hour in such circumstances. There is a group of aircraft – diesel-engined piston aeroplanes – who derive considerable benefit form the lack of duty on AVTUR, as their aircraft use little fuel. I feel it is this group who should be targeted on an ‘honesty’ basis.
He can't have heard the one about how we must hang together or else we will all hang separately!

[chrisN]

Just received via GAAC:
-----------------------
From: "aviationduty" <[email protected]>
To: "aviationduty" <[email protected]>
Sent: Thursday, January 31, 2008 9:54 AM
Subject: Aviation Duty Consultation


Dear Stakeholder

As you will be aware, the Chancellor announced at Pre-Budget Report 2007
that air passenger duty was to be replaced by a duty paid per plane on 1
November 2009. This reform will send better environmental signals, encourage
the more efficient use of aircraft and ensure aviation makes a greater
contribution to both environmental costs and the public finances.

The Government is today launching Aviation duty: a consultation which sets
out options for the detailed design of the new per plane duty. The formal
consultation period will run for twelve weeks from today and close on 24
April 2008. Full details of the consultation can be found on the Treasury
website www.hm-treasury.gov.uk

The Government is seeking the views of stakeholders and encourages responses
from industry bodies, organisations, companies and individuals from all
parts of the aviation sector, as well as those who are concerned with the
environmental impact of the aviation sector, to bring their knowledge and
ideas to this consultation.

Any queries should be directed to the aviation duty consultation mailbox
[email protected] or the dedicated aviation duty
consultation phone number 0207 270 5200.

Lucy Makinson
Head, Environment & Transport Taxes
HM Treasury
-------------------------
Chris N

[soay]

The direct link to this new consultation document is here (http://www.hm-treasury.gov.uk/media/E/2/consult_aviation310108.pdf) (758kb PDF). It states:
The scope of fuel duty will increase from 1 November 2008 when the UK implements a new regime to meet its commitments under the EPD. With the loss of the derogation, Avgas will continue to be taxed irrespective of use, while Avtur will be taxed when used for private pleasure flying, but not for business flying.
Edited to add:
Upon further reading, I came across this gem:
4.7 A list of the potential exemptions that the Government will consider, if sufficient evidence is provided, are listed below:
<snip>
• training flights – flights specifically used to gain a pilot’s licence and not to maintain flight skills, where there may be multiple take-offs;
How to reduce flight safety in two easy steps: first remove the IMC rating; second, tax ongoing training! :ugh:

[pilotincommand]

Is it just me, or is this piece of nonsense actually likely to increase emissions?

The distance banding will give a huge competitive advantage to airlines that route via European hubs to long haul destinations, despite the fact that these tend to be longer routings, especially to North America. This effect will be particularly acute for people flying from regional airports who have a choice of whether to route via LHR and LGW, or places like AMS ,DUB, CDG etc..

The duty on avtur and increase in avgas will only serve to drive even more of our already decimated flight training industry abroad, most probably to the United States, with the associated long haul flying to get there.

[D SQDRN 97th IOTC]

soay

these exemptions are only for aviation duty, not fuel duty

[Fuji Abound]

Will this create an administrative night mare?

What about a typical club aircraft - used one hour for training and the next for private hire.

With the exact science that is most aircraft's fuel gauges that should be interesting working out who has used what when and for what purpose.

Good fun for the airport authorities as well tracking the aviation duty on some fuel but not other fuel all on potentially the same aircraft operators account, or are they going to collect the duty in some other way?

[S-Works]

The last proposal was that pilots made an annual return with the data....

[twelveoclockhigh]

If you read on in fact it says that the governments preferred option is to tax all fuel on all aircaft under 5.7 tonnes - whether for business or private use. This will supersede the fuel consultation which ended in
October 2007. There will be exemptions for international flights etc but the basic premise is that you will be paying either aviation duty if you are over 5.7 tonnes and fuel duty if you are under 5.7 tonnes. If you run on avgas it will not affect you too much but if you use avtur it will!