Following the Scottish Government’s decision to devolve APD in Scotland, George Osborne revealed his plans to axe Air Passenger Duty in the rest of the UK for children, as long as they are travelling in economy.
By March 2016, all under 16s will be exempt from paying APD in all classes of travel. In addition, the Chancellor also revealed the plans to scrap the top two bands of APD in March, charging £71 to long-haul travellers in economy, and £142 to long-haul travellers in higher classes.
"This will save a family of four £26 on a flight to Europe, and £142 on one to the US," the Treasury tweeted.
The government stated it wanted tax changes to be clear to travellers, and in a new regulation airlines will be required to separate out APD from other fees and charges, during the customers booking and payment process.
Osborne stated that fuel surcharges should also be targeted for clear identification as part of the initiative to improve tax transparency in ticket prices.
The move will cost the Treasury £40m in 2015-16. The cost will jump to £80m the following year, and rise to £95m in 2019-20.
The UK’s Board of Airline Representatives (BAR UK) was among industry representatives to welcome the move on APD.
“This is the second reform to APD announced this year and demonstrates the growing awareness within government that the world’s highest air tax needs a severe pruning in order to boost the UK’s global competitiveness and create more jobs. Scrapping APD for children not only benefits UK families, but also stimulates growth in inbound tourism.”Dale Keller
Labour realised the recent decision to give the Scottish Government control over APD could disadvantage airports in North England, and said that the Government should set out an arrangement to make sure they are on equal ground.
EasyJet CEO Carolyn McCall said that the airline support anything which makes travel easier and more affordable for its passengers, and that they hope this is the first step towards to complete abolition of APD.
“The UK currently has the highest air passenger taxes in the world. APD is tax on travel and has a proven, negative impact on UK tourism, investment and business activity. Abolishing APD would boost the UK economy and pay for itself by increasing revenues from other sources. We call on all political parties to commit to the complete abolition of this damaging tax,” she added.
Some airlines, including easyJet have agreed to refund APD for customers who have already booked tickets for children under 12 on flights departing UK airports after May 1, 2015. However, the age that counts is the age of the child on the day of departure from the UK, and not the age of the child at the time of booking, or when flying back from a foreign airport.
Virgin Atlantic CEO Craig Kreeger said: “This is another step on the long road to reform of this economically damaging tax following the banding changes last March.”