Treasury officials are preparing plans to apply standard 20% VAT to per-passenger airport charges for runway, terminal, and ground services. The fees are typically passed through to passengers in ticket prices, so the added VAT would increase costs for travellers and for small and medium-sized businesses that rely on affordable air travel to reach overseas customers. At Heathrow, regulated charges of about £24 per passenger could rise by nearly £5 before other costs such as Air Passenger Duty, fuel surcharges, or booking fees. Industry sources warn the measure could be backdated up to four years, potentially generating around £1bn from Heathrow alone and more across major airports.
"The proposals, being worked up inside HMRC, would impose the standard 20 per cent rate of VAT on top of the per-passenger charges levied by airports such as Heathrow, Gatwick and Manchester for the use of runways, terminals and ground services. Those fees are almost always passed straight through to passengers in the ticket price, meaning the burden would land squarely on travellers and the small and medium-sized businesses that depend on affordable air travel to reach overseas customers."
"At Heathrow, where the regulated charge currently sits at around £24 a head, the change would add close to £5 to the cost of every passenger - before a single penny of Air Passenger Duty, fuel surcharge or booking fee has been added. The official APD rates published by HMRC already range from £15 to £106 for an economy seat depending on distance, and rose again from April under increases pencilled in at the Autumn Budget."
"What is alarming airlines and airports most is not just the prospect of a new levy, but the possibility that Whitehall might backdate it. Industry sources tell Business Matters that ministers are exploring whether to apply the charge as far back as four years, the maximum permitted under current legislation, generating an immediate windfall for the Exchequer running to around £1bn from Heathrow alone."
"Heathrow generated £1.13bn in revenue from passenger charges last year, while Gatwick reported £607m and Manchester Airports Group, owner of Manchester and Stansted, recorded £470m. Factoring in smaller hubs, the total VAT take could comfortably top £1.5bn, although officials have ye"
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