Heather Gordon is Legal Director at Martyn Fiddler Aviation. Heather joined the team in 2013 having previously practiced within a leading Isle of Man law ...Contact Heather Gordon
Deal or No Deal: Analysing your Brexit options
Analysing your Brexit options webinar
Nobody knows what will really happen on the 31st December between the UK and the European Union. There is still no agreement.
But we do know one thing. All aircraft will be impacted. It is illegal to travel in an untaxed means of transport. All business aircraft owners need to get prepared.
Most business aircraft that are flying into the UK, EU or between those points, at the moment are either using temporary admission or are permanently imported. Aircraft that have been imported into the EU via the UK may no longer be in free circulation in the EU and vice versa. If a business aircraft needs to be operated in those two jurisdictions, it will have to be re-imported into the opposite jurisdiction. If the business aircraft meets the criteria, it may be appropriate to use temporary admission.
Aircraft which have been imported into the EU28 by their aircraft operator will also be impacted and same rules (above) apply. There may be added complication as the aircraft operator may not be in the same EU location as the aircraft owner after 31 December 2020. Aircraft owners should discuss importation with their aircraft operator as soon as possible to understand any plans they have put in place or any action that may need to be taken.
There will be no special treatment for aircraft that are not on a UK or European registration. If the aircraft has been imported correctly into the EU, it will retain EU free circulation. If the aircraft has been imported via the UK, it will have UK free circulation. The registration of the aircraft does not come into it. What matters is how the importation of the aircraft has been dealt with at the time and making sure the importation was dealt with correctly.
Similarly, there are no special considerations for aircraft imported prior to 2011, under the old regulations. If they are still owned and operated in the way they were at time of import; they will be imported in the UK but not the EU.
Whatever the outcome of the Brexit negotiations, all business aircraft owners will find themselves in a situation where they have to ensure that their aircraft are appropriately configured with the new rules.
Business aircraft owners need to get their teams ready to look at these issues today. This is going to require all business aircraft owners to dust down their files and get out the paperwork that supported the current importation status of the aircraft. Your aircraft manager/operator, Tax Advisor and the legal counsel all need to look at what they did previously, to pull out the paperwork and see how they dealt with importation originally and ask has anything changed with respect the aircraft status? why was the aircraft ownership and registration structured in a particular way?
There is specific documentation Martyn Fiddler Aviation would recommend business aircraft owners to look at immediately. The majority of aircraft imported would use something called a “Single Administrative Document” or a “SAD”. In Italy and Spain this would be referred to as a “DUA”. In the UK the form is a “C88”. The key point is that they are all the same format. They are instantly recognisable in every member state. Also required is the invoice for inter-community acquisition paperwork.
How to plan for Brexit without certainty of a deal
There are two things to really consider when getting ready for the end of the transition period:
- It is not possible to implement a solution prior to 31 December 2020; and
- Your need to consider which solution will fit your aircraft situation based on the preparation your team had done and the time it will take to implement.
Knowing when to make an import decision
There are 3 broad categories of solution – and different solutions will have various lead in times.
- The simplest is temporary admission (TA). If you need to re-import your business aircraft into Europe from the UK, the aircraft might simply be able to arrive under TA. There is no lead up time required.
- The second option is re-importation. If your aircraft needs to be reimported into one or more territories, this needs a few working days.
- The longest lead time is restructuring. You will need to put a new company in place and this will likely require several weeks.
An early assessment of what is needed will give the maximum time to make the best import decision for the aircraft – remembering that each aircraft and owner are unique.
Will it matter where the aircraft is located on 31 December? This idea should be approached with caution. Aircraft often leave their home jurisdiction in the EU and spend time away, and when they return back they haven’t lost their VAT status here because there is an automatic right to returned goods relief (RGR). This will remain the same on the 31 December 2020.
However, Martyn Fiddler Aviation have heard stories from other sources which have speculated if an aircraft is in the opposite jurisdiction overnight on the 31 December, the aircraft will automatically get a fully imported status in that jurisdiction. Business Aircraft owners will have to be extremely careful: if the authorities take the view that the aircraft was in before midnight, the aircraft will be able to remain without consequence, however, the next time the aircraft leaves that jurisdiction the chain will be broken. When the aircraft re-enters the opposite jurisdiction again, the authorities could treat this flight as entering afresh.
Another myth is around the notion of ‘Grandfathering’. What is it and how likely is it? Grandfathering would occur where the UK and EU governments decided that what was in free circulation in the EU28 before the end of the transition period remains in free circulation in the EU27 and UK after the transition period. During the Brexit negotiations there has been hope that both would reach an agreement on this together with a guarantee that aircraft will be given special consideration. However, today, this is a fading hope. Do not bank on any kind of grandfathering.
What about aircraft purchased after the transition period? New aircraft being delivered after 31 December 2020 will need to be imported. If they are UK based, the aircraft will need to be imported into the UK. If the aircraft is EU based, it will need to be imported into the EU and, depending on the operation of the aircraft, may need to be imported in other jurisdictions as well.
Overall the message from Martyn Fiddler Aviation is:
- All aircraft will be impacted in one way or another
- Get your team prepared and know what documentation you are looking
- Give yourself enough time to act
- Be wary of acting before you have all information needed to make a full decision