Back in March, Business Air News kindly reached out and asked us for our thoughts regarding – how do governments tax and legislate for business aviation, and what impact do the various regimes have on the industry?
We were honoured to be included in Business Air News’ recent piece. We focussed on a few different areas and we wanted to share our response in full with you.
Our comments focussed on the current (Q1 2025) business aviation tax and legislation in our region, identified the most favourable and most stringent tax environments, outlined the ideal scenario for operators, and proposed changes which could help to stimulate industry growth.
Let’s delve into Mark Byrne, Director and Adrian Parcell-Jones, Tax Director’s insights on this subject.
What are our views on the current business aviation tax and legislation regime in our part of the world?
Mark: In the UK and the Isle of Man (IOM), business aviation tax is exclusively limited to Air Passenger Duty (APD). Our Stansted team efficiently handle this for some clients. Although APD may seem inconvenient, it serves as a substitute for VAT, which is not applied to flight ticket prices.
Adrian: UK tax authorities respect the airline VAT zero rate for jet charters but remain adverse towards companies reclaiming VAT on imported business aircraft, particularly outside large corporates. VAT registration for aircraft owning businesses may never be granted or may be assessed upon inspection. While HMRC call centres are difficult to engage with, Isle of Man Customs are more accessible, discussing business plans for lease businesses and providing clarity on VAT positions for business jets.
Where is the best tax environment for business aviation and conversely, where is the most stringent?
Mark: In our view legislation within the industry prioritises safety, a perspective which is widely recognised.
Martyn Fiddler identifies two locations as particularly business aviation friendly. The Isle of Man offers a favourable low tax regime for those operating aircraft solely for business purposes. Meanwhile, Ireland’s tax framework supports the aircraft leasing industry, in which Ireland excels.
Adrian: While the IOM tax regime is conducive to business jet ownership, it is the experience of the administrators dedicated to looking after aircraft owning companies through the Corporate Service Providers (CSPs) that attracts owners, private offices, legal counsel and operators to think of the IOM for aircraft ownership and registration as their first choice, for both corporate and private business jet ownership solutions.
Summarise a best scenario for operators.
Mark: There is no one size fits all solution for clients in the business aviation industry. The ideal scenario depends on what best meets the client’s needs. As clients use business aircraft for a variety of activities, the optimal approach will vary. At our core, Martyn Fiddler are committed to delivering exceptional customer service and high levels of governance. Our process includes a thorough analysis of what the operator seeks to achieve, followed by our team of specialists evaluating all viable environmental options tailored to the specific needs of each client.
Adrian: In addition, we know the importance of providing a seamless service for aircraft owners to encourage their entry and continued participation in the aviation business. Operators must ensure they deliver their key services with the excellent quality recognised in the business aviation world. Outsourcing fiscal requirements to suitable providers for ownership and import solutions will help them maintain their focus on their core competencies.
Suggest changes that might encourage industry growth.
Adrian: To encourage industry growth, we know that extending the application of the VAT zero rate, for airlines and charter businesses, to operators and airlines servicing domestic routes could help. This extension could eliminate the ‘VAT trap’ created by the HMRC’s 2017 policy change, which removed the right to VAT recovery on asset imports to the UK from all but the legal owners. Domestic airlines and operators can no longer reclaim VAT on leased aircraft or engines, resulting in a 20% premium on their operations.
Mark: The best argument for lowering taxes and legislation is to encourage growth within the industry.
Adrian: In a recent meeting with the UK Chancellor of the Exchequer on aviation and taxes, the most compelling argument is that tax reductions should not rely on the assumption that they will automatically encourage growth and increase the overall tax revenue. Instead, such requests should highlight the potential for increased growth and the consequential benefits to other industries and significant support for government policy in key areas.
Mark: A flexible, responsive, and efficient regulatory environment naturally promotes growth, provided safety and the rule of law are maintained.
To read the article from Business Air News please click the link and head to page 10 https://www.businessairnews.com/viewer/372/html5/index.html?pn=11
If you have any queries with regards to owning, buying or selling a business aircraft or high value asset please contact Martin@Martynfiddler.com
