Rachel Reeves is reportedly planning a £1 billion 'stealth tax' on family holidays by imposing 20% VAT on airport charges, just as Labour launches a summer savings package. Treasury officials are drawing up plans to apply VAT to fees airports charge airlines for runway and terminal use, which critics say would add to holidaymakers' costs.
The proposals, being explored by HMRC, could add nearly £5 to a standard Heathrow passenger charge of around £24, with airlines expected to pass the cost on through higher ticket prices. This would come on top of Air Passenger Duty, which already adds between £15 and £106 to economy flights. Industry figures warn the UK could become one of the world's most heavily taxed aviation markets.
Ministers are also considering backdating the levy by up to four years, potentially landing airlines with huge retrospective bills. At Heathrow alone, the move could saddle carriers with around £1 billion in additional costs, according to The Telegraph.
The plans emerged as Ms Reeves unveiled a £300 million package of temporary tax cuts and discounts for summer, including reduced VAT on entry tickets for theme parks, zoos, museums, cinemas, theatres and soft play centres from June 25 to September 1. Children's meals will also qualify for the reduced rate. The Government claimed the measures would save a family of four around £20 on a theme park trip.
However, the aviation industry reacted furiously. An Airlines UK spokesman warned the UK is already one of the most overtaxed aviation markets, and the cost burden could make it uncompetitive. Shadow business secretary Andrew Griffith said any additional tax on aviation is a tax on doing business and an attack on hard-working families. Industry insiders also questioned the legality, as international aviation agreements generally exempt airfares from VAT.
Heathrow Airport is understood to be seeking legal advice. A Government spokesman insisted no decision had been taken, stating: 'The Government is not considering any changes to tax rules in this area. HMRC routinely engage businesses on how existing tax rules are being applied.'
