Trade accused of ‘lacklustre’ response to APD

The Caribbean Tourism Organisation is preparing to challenge the UK government over Air Passenger Duty as the UK trade stood accused of a lightweight response to “potentially devastating” increases in the tax.

Chancellor of the Exchequer George Osborne alarmed the industry this week when he failed to address APD in the budget, meaning November’s planned rise will go ahead, but he pledged to continue consulting on changes in aviation tax.

In response, the CTO is considering a legal challenge against the British government over the continuation of APD. It argues  it is a tax on one of the Caribbean’s key exports due to the region’s dependance on tourism.

John Maginley, CTO chairman, said: “We understand the British government needs to raise taxation but the current structure is unfair and unbalanced. This is such a hugely serious issue for our region that we are reviewing the opportunity to put a legal challenge to the British government.”

Richard Carrick, the former Hoseasons chief executive, was scathing about the industry’s response. He said: “Any other industry would have its top leaders of its biggest companies ranting about the injustice and potentially devastating effects of these proposed increases on our industry rather than relying on the lacklustre responses of individuals and organisations that do not operate at the sharp end and don’t have the weight of authority that key business leaders do.

“Yet again, we are perceived as a soft touch, an easy option for government to raise money on the back of spurious rationale by just lying down and letting them take liberties with one of the UK’s most successful industries.”

Osborne further targeted APD when he used the budget to introduce additional penalties, starting at £100 but rising for repeat offences, on those who fail to pay the duty on time.

Russell Eisen, taxation services director at accountancy firm Ellman Wall, said: “The new penalites will be tough for those who fall foul of them but most people should be compliant.”

APD aside, the budget has caused few ripples in the industry. White Hart Associates partner Chris Photi said the increase in Capital Gains Tax to 28% would have little effect on travel business owners trying to sell their businesses as it would be offset by the increase in Entrepreneur’s Relief from £2 million to £5 million.

Small and medium-sized companies will benefit from tax and National Insurance cuts and exemptions, in particular a drop in the small business corporation tax rate to 20% next year.

The increase in VAT from 17.5% to 20% from January 4, 2011, will see holiday prices rise marginally, while a reversal of the decision to repeal the Furnished Holiday Lettings tax exemptions should give the domestic sector a boost.