§ Mr. Matthew BanksTo ask the Chancellor of the Exchequer what steps he has taken to resolve the issue of the hidden VAT which is incurred by airlines as a consequence of the Civil Aviation Authority's VAT status as a public body.
§ Mr. Heathcoat-AmoryI am pleased to announce that, from 1 April 1995, the Civil Aviation Authority will be granted taxable status in respect of its supply of en route air navigation services.
This change will enable the CAA to recover the VAT paid in its en-route operating costs and capital expenditure, which is estimated as being in the order of around £30 million per annum. Over £20 million of this, representing VAT on en-route operating costs, will be passed directly to the airlines in the form of lower charges. The remainder, formerly incurred on the CAA's capital spending, can be used to fund the CAA's investment programme.
This change removes a source of potential discrimination against United Kingdom airlines, and will be widely welcomed by the airline industry.