Since its inception in 1973 UK VAT law has stipulated that “qualifying aircraft”, those over 8,000kg max take off mass, are exempt from VAT for the purpose of acquisition, management and operating costs. This exemption has been enjoyed by private owners and commercial operators alike.
A recent EC decision states that this threshold for exemption is no longer acceptable and while the UK authorities response is still not yet clearly defined it is certainly a cause for thought if not concern for all those possible affected by it. For private owners who partly use their aircraft for private travel it would no longer be possible to reclaim VAT on a proportion of the overall costs. Commercial operators will no doubt be able to reclaim the Sales Tax or equivalent on costs but will nevertheless be faced with serious cash flow issues.
On the up side there is potential for private operators to pass their aircraft over to commercial operators for use on their fleets. This will further increase the already wide range of aircraft available to charter passengers.
It is estimated that business aviation contributes some £3.5 billion to the UK economy annually and provides approximately 50,000 jobs either directly or indirectly. In such economic conditions as we currently endure it is a shame that such far reaching edicts are put out with seemingly little regard for their true impact and for all the world to have apparently come from a base of, shall we say, “reduced awareness”. Dave Edwards of a leading UK operator phrases it thus: ” …To implement this change in such a rapid manner, with virtually no industry discussion, opinion or debate would be, frankly, ill-considered at this time.” Will Curtis of Rizon is somewhat more outspoken; “This is typical of the way that the EU legislates – from a position of comprehensive ignorance and without consultation of any description.”
Whatever your stance on the subject it is an area to keep a close eye on. Fortunately our charter clients are relatively insulated from its effects and will continue to be free to use business charter flights as and when they are seen to be cost effective.