Legal action is reportedly being prepared to help millions of passengers get their money back after airlines kept almost £300 million in taxes paid by passengers who cancelled or missed their flights.
Carriers have been accused of effectively denying passengers Air Passenger Duty refunds where they are rightfully owed by charging them “excessive” fees to reclaim it.
Often “administration fees” far exceed the value of the tax being refunded, making a genuine reclaim impossible, the Telegraph reported.
The newspaper cited Jet2 as charging £40 for reclaiming APD worth £13 for a short-haul economy flight, while BA charges up to £30 for the service. Airlines claim the fees are to cover the cost of processing refunds.
But it emerged that carriers are running a free, automated refund service for parents who booked flights for youngsters before the government scrapped the duty for under 12s earlier this year.
APD costs up to £73 depending on the type of flight and is collected by airlines at the point of ticket purchase, but is only due to be paid to the government if passengers board the flight.
Airlines must keep strict records of which passengers board flights and which don’t so they know how much to pay the taxman at the end of each month, HMRC told the Telegraph.
This means unless passengers claim a refund airlines retain a portion of their ticket price which is equivalent to APD.
Consumer experts compare the behaviour of airlines to the recent airport VAT scandal, in which retailers asked for customers’ passport details so they could claim tax breaks, which they secretly kept.
Calculations done by Casehub, the claims firm organising the legal action, suggests that airlines have retained £287 million of tax which belongs to passengers over the past six years.
This is based on 2% of short-haul passengers, and 0.5% of long-haul passengers missing their flights, as well as 2% annual interest added to the sum.
Barristers at legal chambers 4-5 allege the administration charges are in breach of the Consumer Rights Act 2015 because they are “excessive, do not provide a true service to the customer, and are designed to discourage or have the effect of discouraging the passenger from seeking reimbursement”.
James Daley, director at consumer campaign group Fairer Finance, said: “Just like with the airport VAT scandal, this is an example of the air industry taking advantage of customers’ good will.
“Any responsible company would offer automatic refunds for tax that is owed to customers, and charging such prohibitive fees is incredibly bad practice.”
A British Airways spokesman said its policy was “in common with many other airlines”.
A Virgin Atlantic spokesman said it does not charge for refunding children’s APD as the need for it arose from a change in legislation, rather than a non-refundable cancellation.
Ryanair said a “tiny” number of passengers reclaim APD after failing to make a flight.
A spokesman for Monarch said: “Our administration charge is a reflection of the overall costs that are incurred by us in making refunds, including APD which is paid at the time of booking.”
Jet2 declined to comment.