The coalition Government’s emergency budget of 22 June 2010 revealed plans to revise the scope of the VAT zero rate for aircraft. The measure to be adopted changes the definition of aircraft from one based on weight and usage to one based on the status of customers. Therefore, from 1 January 2011, supplies of aircraft will be zero-rated in terms of VAT only where purchased by airlines operating for reward predominantly on international routes. This seeks to align UK tax law with The EU Rules contained in Article 148 of EU Directive 2006/112/EC.
The new Government will legislate to this effect in a Finance Bill following the summer recess.