Commercial Aircraft Lessors
Aircraft on an air operators certificate (AOC) for commercial operations can generally be zero rated for VAT at importation. However, when an aircraft returns from commercial operations (such as an airline) at the end of its lease, it will no longer be on the AOC and so VAT may be due at the standard rate (17-27% depending on location) at the time it arrives back into Europe. The VAT responsibility for its tax status lies with the aircraft owner who is often the lessor. This could prove to be a very expensive and unwelcome surprise for the unwary lessor. Generally speaking, most commercial airliner leases will place responsibility for dealing with tax matters with the lessee. As part of a lessor's ongoing monitoring of its assets, we recommend that the lessor checks that its lessee client has dealt with their tax obligations with respect to the aircraft appropriately. This is to ensure that in the event that the aircraft is returned to the lessor either as planned or prematurely it does not place an unexpected and potentially expensive tax obligation on the lessor.
Martyn Fiddler Aviation can audit a lessor's fleet of aircraft to ensure that lessees' have fulfilled their obligations as part of the lessor's ongoing monitoring of their assets. If a lessee has discharged their obligations correctly then no action needs to be taken. If not, Martyn Fiddler Aviation will be able to advise on what remedial action should be taken and can arrange for this if required. This will protect the lessor from encountering unexpected VAT obligations.
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Be Prepared for 31 December 2020
In less than 4 months’ time the UK will leave the European Union (31 December 2020). At the time of writing there is no agreement in place to determine what the status of goods (including business aircraft) imported into the EU (including the UK and Isle of Man) before 31 December 2020 will be.
In the newsletter attached Martyn Fiddler Aviation outline the list of possible results, explaining the impact of each scenario and the work that will be requested of aircraft owners in order to remain in free circulation in both the UK and the EU.