United Kingdom Planning VAT Changes

On January 4, 2011, the United Kingdom is expected to implement two changes regarding Value Added Tax (VAT) policies. First, aircraft over 8,000 kilograms (17,635 pounds) will no longer be applied a zero rating for VAT purposes. Under current policy, aircraft can be fully imported into the UK allowing for “free circulation” within the 27 EU member states. Second, the standard VAT rate in the UK will be increased from 17.5% to 20%. With these changes, the zero rating of aircraft over 8,000 kilograms will not be available and operators will not be able to import aircraft into the UK and obtain a zero VAT rating. Aircraft correctly imported into the UK prior to January 4, and already in free circulation, will retain their import status and zero VAT rating. Generally, under the World Customs Organization’s Istanbul Convention on Temporary Admission, a third country or non-EU registered aircraft is eligible for “conditional” relief of duties and taxes. These conditions include, but are not limited to, not remaining in the EU for more than six months out of a twelve month period. Also, the aircraft must be owned outside of the EU and not be made available for use within its boundaries by EU residents. Customs regulations typically provide that transport of EU residents within the EU territory is not subject to duty and tax so long as the travelers are employed by the aircraft owner or otherwise authorized to be on board. While this is the case, many operators still elected to import their aircraft into the UK to eliminate any potential confusion by Customs officials. The importation process did not involve re-registration of the aircraft and was relatively straightforward with the assistance of a qualified advisor in the UK. For NBAA Members conducting traditional Part 91 operations, full importation of their aircraft into the EU should not be necessary for typical flights. As explained above, operators must meet the conditions regarding length of stay in Europe and restrictions on carriage of EU residents. Operators planning to carry EU residents within EU member states should be prepared to explain the presence of these individuals on the aircraft to Customs officials as necessary. So long as EU residents are either employed by the non-EU aircraft owner or possess written authorization to be on board the aircraft, VAT issues should not arise. As this is a complex issue that is dependent on the specific nature of the flight operation, Members are encouraged to seek advice from qualified aviation tax or legal counsel.

Source: http://www.nbaa.org/admin/taxes/intl/20101206-uk-vat.ph

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