Air departure tax (ADT) was third in the line-up of Scottish devolved taxes. The legislation is in place: royal assent was received on 25 July 2017 and the Air Departure Tax (Scotland) Act 2017 subsequently published. ADT would replace air passenger duty (APD) from April 2018. The tax, as with APD now, will be payable by aircraft operators and charged on the carriage of chargeable passengers on chargeable aircraft on any flight that begins at an airport in Scotland.
Scottish departure lounge: Paragraph 86 of the Smith Commission report, published on 27 November 2014 recommended that: ‘The power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament. The Scottish government will be free to make its own arrangements with regard to the design and collection of any replacement tax, including consideration of the environmental impact.’
Scotland Act 2016 s 17 furnished the Scottish Parliament with the power to create legislation to replace APD. In addition, para 26 of the agreement reached between the Scottish and UK governments on the Scottish government’s fiscal framework provided for the introduction of a Scottish APD replacement tax from April 2018.
Flight path: The main aim of the Scottish government was to reduce ADT by 50% and abolish the tax altogether ‘when resources allow’, to boost international connectivity by establishing new routes, increase competitiveness, generate sustainable growth and attract further inbound tourism to Scotland – the latter three of which are difficult to measure. However, the aim fits with the concept of internationalisation, one of four priorities underpinning Scotland’s economic strategy. Various impact assessments have been undertaken, and for the last two years, the Scottish government has been engaging in a series of stakeholder meetings with tax, demographics and senior airline professionals to work out its proposals.
Turbulence: Since 2001, and as detailed in Excise Notice 550, passengers carried on flights from airports in the Scottish Highlands and Islands have been exempt from APD. However, transfer of the exemption to ADT requires notification to and assessment by the European Commission in compliance with EU law. Issues remain with state aid (which refers to forms of public assistance, given to undertakings on a discretionary basis, which has the potential to distort competition and affect trade between member states of the EU). Combined with Brexit throwing a spanner into the works, it is not clear when ADT will be introduced.
The Scottish government has convened a working group of key stakeholders with expert knowledge of the Highlands and Islands economy. In addition, the Scottish government is continuing to work with the UK government to formulate a solution. The details of what solution will emerge are as yet unknown. The cabinet secretary for Finance and Constitution informed the Scottish Parliament on 1 June 2018, that the Scottish government is not prepared to commit to introducing new legislation whilst uncertainty over the Highlands & Islands exemption remains.
Delayed: As part of UK Budget 2017, UK and Scottish governments agreed to delay ADT until issues have been resolved regarding the tax exemption for flights departing Highlands and Islands airports.
In June 2018, the Scottish government and UK government agreed that it will not be possible to introduce ADT at the beginning of the next fiscal year, April 2019.
The current UK APD rates and bands, and Highlands and Islands exemption, will continue to apply in Scotland from 2018/19 until further notice. Airlines will therefore need to set their fares for summer 2019 and beyond based on an APD cost base. Until a suitable solution is found which produces no financial detriment to the Highlands & Islands region, it seems as if ADT will be left in the hangar.
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Scottish air departure tax: left in the hangar?
Delays prevent take off.
Air departure tax (ADT) was third in the line-up of Scottish devolved taxes. The legislation is in place: royal assent was received on 25 July 2017 and the Air Departure Tax (Scotland) Act 2017 subsequently published. ADT would replace air passenger duty (APD) from April 2018. The tax, as with APD now, will be payable by aircraft operators and charged on the carriage of chargeable passengers on chargeable aircraft on any flight that begins at an airport in Scotland.
Scottish departure lounge: Paragraph 86 of the Smith Commission report, published on 27 November 2014 recommended that: ‘The power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament. The Scottish government will be free to make its own arrangements with regard to the design and collection of any replacement tax, including consideration of the environmental impact.’
Scotland Act 2016 s 17 furnished the Scottish Parliament with the power to create legislation to replace APD. In addition, para 26 of the agreement reached between the Scottish and UK governments on the Scottish government’s fiscal framework provided for the introduction of a Scottish APD replacement tax from April 2018.
Flight path: The main aim of the Scottish government was to reduce ADT by 50% and abolish the tax altogether ‘when resources allow’, to boost international connectivity by establishing new routes, increase competitiveness, generate sustainable growth and attract further inbound tourism to Scotland – the latter three of which are difficult to measure. However, the aim fits with the concept of internationalisation, one of four priorities underpinning Scotland’s economic strategy. Various impact assessments have been undertaken, and for the last two years, the Scottish government has been engaging in a series of stakeholder meetings with tax, demographics and senior airline professionals to work out its proposals.
Turbulence: Since 2001, and as detailed in Excise Notice 550, passengers carried on flights from airports in the Scottish Highlands and Islands have been exempt from APD. However, transfer of the exemption to ADT requires notification to and assessment by the European Commission in compliance with EU law. Issues remain with state aid (which refers to forms of public assistance, given to undertakings on a discretionary basis, which has the potential to distort competition and affect trade between member states of the EU). Combined with Brexit throwing a spanner into the works, it is not clear when ADT will be introduced.
The Scottish government has convened a working group of key stakeholders with expert knowledge of the Highlands and Islands economy. In addition, the Scottish government is continuing to work with the UK government to formulate a solution. The details of what solution will emerge are as yet unknown. The cabinet secretary for Finance and Constitution informed the Scottish Parliament on 1 June 2018, that the Scottish government is not prepared to commit to introducing new legislation whilst uncertainty over the Highlands & Islands exemption remains.
Delayed: As part of UK Budget 2017, UK and Scottish governments agreed to delay ADT until issues have been resolved regarding the tax exemption for flights departing Highlands and Islands airports.
In June 2018, the Scottish government and UK government agreed that it will not be possible to introduce ADT at the beginning of the next fiscal year, April 2019.
The current UK APD rates and bands, and Highlands and Islands exemption, will continue to apply in Scotland from 2018/19 until further notice. Airlines will therefore need to set their fares for summer 2019 and beyond based on an APD cost base. Until a suitable solution is found which produces no financial detriment to the Highlands & Islands region, it seems as if ADT will be left in the hangar.
