Air Departure Tax Administration Regulations: business and regulatory impact assessment

Section 7: Options Considered and Recommended

7.1 Options Considered Initially

This assessment considers two possible options in relation to introducing secondary legislation to enable Revenue Scotland to administer ADT effectively. These options are:

• Do not introduce secondary legislation in advance of ADT’s introduction date.
• Introduce secondary legislation to enable Revenue Scotland to administer ADT effectively.

Option 1 - Do not introduce secondary legislation in advance of ADT's introduction date.

Sectors and groups affected

Airlines and other aircraft operators.

Benefits

There are no perceived benefits to this option. This secondary legislation is required to ensure that ADT can effectively administered by Revenue Scotland when it comes into force on its proposed introduction date of 1 April 2027.

Stakeholders have engaged with the Scottish Government and Revenue Scotland in good faith on ADT policy development in the period since the 2026-27 Scottish Budget. Therefore, not introducing this secondary legislation would result in reputational damage to both the Scottish Government and Revenue Scotland and significant cost uncertainty for the sectors and groups affected. Not making the required amendments to the ADT administrative provisions in the ADT Act via secondary legislation in advance of 1 April 2027 could adversely impact on Revenue Scotland’s ability to effectively administer ADT.

Costs

A lack of secondary legislation amending the ADT administrative provisions in the ADT Act could lead to increased taxpayer uncertainty and risk. There would be costs associated with this option, including the costs of legal uncertainty of introducing a tax without ensuring that the administrative system underpinning it operates effectively.

Revenue Scotland has also made significant progress in preparing for the introduction of ADT, incurring capital and resource expenditure in 2025-2026 and 2026-2027 to develop IT systems and appoint new staff. There are also contractual commitments to suppliers that must be met.

Option 2 - Introduce secondary legislation to enable Revenue Scotland to administer ADT effectively

Sectors and groups affected

Airlines and other aircraft operators.

Benefits

Secondary legislation is required to ensure that Revenue Scotland can administer ADT effectively.

Retaining core elements of the current UK-wide APD regime will provide continuity and certainty for taxpayers. Similarly, aligning the administration of the tax with the arrangements in place for other devolved taxes will create consistency across the devolved tax regime and provide for a more efficient approach to collection and management.

Costs

There are approximately 50-70 commercial APD taxpayers in Scotland. Revenue Scotland does not yet have an accurate figure of occasional returners (such as private and business jet operators), but this is expected to be less than a third of the total number of commercial operators. As such, a relatively small number of airlines and other aircraft operators will be liable to register and pay ADT.

During stakeholder engagement related to the introduction of ADT, it was raised that some extra business administration and the adjustment of IT systems will be an unavoidable consequence of the introduction of ADT.

The Scottish Government would expect the administration costs involved in ADT to be broadly similar to those for APD. Any costs are anticipated to be minimised by the similarities of the two tax regimes. Although the exact format of the tax returns will be set out by Revenue Scotland in due course and may differ from that of APD, the Scottish Government expects that any tax return would draw on data that taxpayers have readily available and is already required to make APD tax returns.

There will inevitably be additional administration costs for business which require to submit returns and data in respect of both ADT and APD. However, the Scottish Government does not anticipate significant additional administration costs arising from this and expects overall business costs to be broadly comparable to current APD costs. This has been set out in further detail in the BRIA published by the Scottish Government in 2017.

The Scottish Government also understands that airlines and air carriers operate in numerous jurisdictions around the globe due to their business model. They must regularly conform with different international tax administrations and can reasonably be expected to have the expertise to adapt their systems to ADT's administration.

A more comprehensive assessment of the costs associated with introducing ADT in a way that retains the fundamental structure of APD and aligns with the RSTPA was set out in the 2017 Act's financial memorandum.

7.2 Recommendations/ preferred options

The Scottish Government recommends the adoption of option 2, which is to introduce secondary legislation to enable Revenue Scotland to administer ADT effectively.

We recommend this option on the basis that it will reduce the uncertainty for prospective taxpayers (airlines and aircraft operators) and their customers (passengers) and make the transition between APD and ADT as smooth as possible for the businesses and stakeholders affected.

This option also reflects feedback from respondents to the ‘Delivering Scotland’s Air Departure Tax’ consultation as well as broader stakeholder engagement.

Declaration

Sign-off for Final BRIAs: I have read the Business and Regulatory Impact Assessment and I am satisfied that it represents a fair and reasonable view of the expected costs, benefits and impact of the policy, and that these have been taken into account when making the policy decision. I am satisfied that business impact has been assessed with the support of businesses in Scotland.

I am also satisfied that officials have considered the impact on consumers as required by the Consumer Scotland Act 2020 in completion of the Consumer Duty section of this BRIA.

Signed:

Date:

Minister's name

Minister's title

Scottish Government Contact point: Stuart Wilson