Claiming back taxes for unused flight - Bad BA!

[RichardMannion]

So it comes as no surprise that BA insist on charging a 30 pond per person per ticket fee for refunding taxes and fees on unused tickets.

My parents needed to fly home early but being on non-refundable tickets, they had to book a new set. So I pointed out that they could claim their tax back (and like most people, they didnt know this was possible!), but guess who had to sort it out - muggins here.

So phoning BA, to claim the 27.10 in taxes back on each ticket, they quote me the above 30 'administration fee' - strange seen as Virgin don't charge an 'admin fee' for this situation. Now the intersting part is obviously that some of this is tax that is collected on behalf of the UK government (the new HMRC - Revenue Control), but is not paid if the passenger pays, so is this technically BA defrauding the HMRC, as they are collecting a duty on their behalf but not passing it back to the customer if not used? In my opinion it would appear so, so I have fired off a mail to the London HMRC office to get their view - one can ony think how much this must run into every year. Maybe one to highlight to a couple of journo friends too, as obviously a poor PR exercise for BA but a great one for VS.

Thanks,
Richard

[preiffer]

Don't Ryanair do the same?

[mitchja]

Airlines do seem to be wising up regarding refunding taxes now though, as more people become aware that they can do it.

Having just booked my next BMI flight MAN>LHR return, the basic fare cost me £5.00 return and I've paid £46.00 in tax.

I think the airlines should be made to state what their admin fee is as BMI do say they will charge you an admin fee if you cancel but not how much.

Regards

[preiffer]

Ah, found it:

Can I apply for a refund for my unused flight?
All Ryanair fares are fully changeable flight/dates/times/routes and names (up to three hours prior to original flight departure) however fares, fees or charges are non-refundable. Government taxes may be refunded. Ryanair apply refund Û20 per person administration charge for tax refund requests. If the refund amount due to the customer is less than the applicable refund administration charge then no refund will be made. Tax refund requests must be made within one month from the booked travel date.

Sorry Richard, it's common practice from what I know (as James says, BMI as well as other majors do it too). I'm sure they've been through the legalities of it, so while your quest to raise it to the top of the tree is, umm... gallant (?)[:p] - I fear it will be in vain.

[RichardMannion]

Yes, I forgot that RyanAir do this as well - knowing them, most of their profit will come from witholding taxes and duties for missed flights.

Will be interesting to see what HMRC say.

Thanks,
Richard

About 8 years ago I had a run in with the revenue over a similar issue. I had implemented a system that added a % onto everything that the 'outlet' I implemented this for sold. One of the services they offered included collecting some duty and the system did add on a % and offered this on the invoice as an amount of duty. As the amount paid to the rev was different to the amount collected the 'outlet' was essentially breaking the law and stern words were exchanged and an instruction to put this right was given.

Now this is different to having to pay an admin fee to the airlines which I am sure their T&Cs allow for, but, at least 8 years ago, if you collected an amount claimed to be for tax or duty that same amount had to go to the rev. So the dilemma is what happens if you do not try to claim. The airline has collected an amount of duty but not paid it!!

As I say this was a long time ago and in totally different circumstances but may still be relevant.

Paul

They're not defrauding HMRC (BTW, that's Her Majesty's Revenue & Customs - not "Revenue Control") in this case.

Because the customer isn't travelling on the old ticket, the tax isn't due to HMRC and has to be refunded in whole back to the customer. However, the charging of an "admin fee" simply serves to offset the amount due back to the customer as a direct deduction to save having to do 2 transactions (i.e. a refund of the whole amount, then another charge for the "admin fee").

The whole concept of the "admin fee" being higher than any tax refund is pretty despicable, but technically they could do 2 transactions and your parents would end up a further £2.90 each out of pocket

BTW, VS have introduced an admin charge for refunds - see "Q How will payment for my refund be settled?" here (£30 for restricted tickets & £15 for flexible tickets - deducted from any amounts due to the customer)

Cheers

Michael

[RichardMannion]

Originally posted by mcuth
They're not defrauding HMRC (BTW, that's Her Majesty's Revenue & Customs - not "Revenue Control") in this case.

Because the customer isn't travelling on the old ticket, the tax isn't due to HMRC and has to be refunded in whole back to the customer. However, the charging of an "admin fee" simply serves to offset the amount due back to the customer as a direct deduction to save having to do 2 transactions (i.e. a refund of the whole amount, then another charge for the "admin fee").

The whole concept of the "admin fee" being higher than any tax refund is pretty despicable, but technically they could do 2 transactions and your parents would end up a further £2.90 each out of pocket

BTW, VS have introduced an admin charge for refunds - see "Q How will payment for my refund be settled?" here (£30 for restricted tickets & £15 for flexible tickets - deducted from any amounts due to the customer)

Cheers

Michael

Thanks Michael!

On the last point, the fees are correct but for non-refundabe tickets where there is only taxes to be returned, there is no fee. The thinking being that the other fees will come out of the fare element that is refundable on those applicable tax parts.

Maybe not defrauding then, but why should BA keep the tax element - I woudl much rather it go to the right place and help pay for the needed improvements to UK airports. Think how much UB tax is withheld by BA.... if I recall its something like 8.20 per passenger at LHR which is meant to go towards the upkeep of LHR, not BA's coffers.

Thanks,
Richard

Originally posted by RichardMannion
On the last point, the fees are correct but for non-refundabe tickets where there is only taxes to be returned, there is no fee.

VS should really state that then - they currently don't.

The thinking being that the other fees will come out of the fare element that is refundable on those applicable tax parts.

Hmmm, I'm sure there's something in there that makes sense, but that's just too confusing. Do you perhaps mean that the non-refundable part of the ticket (i.e. the base fare) has already covered any fees due?

Maybe not defrauding then, but why should BA keep the tax element

In case you misread, they're not actually keeping the tax element - their "admin fee" is greater than the amount due back to the customer, in which case, no refund is made (admin fees for refunds are covered in this Ask BA question). Perhaps if they did it via 2 transactions, then it might be clearer. In your example: Refund = £27.10, New Charge (admin fee) = £30.00

Ack, this is almost like I'm defending the dark side [ii] Despite not agreeing with the policy of "admin fees" being larger than the tax element on non-refundable tickets (given that the customer has already lost the fare paid), I can't see that they're doing anything wrong (technically, not morally) here.

Cheers

Michael

Think how much UB tax is withheld by BA.... if I recall its something like 8.20 per passenger at LHR which is meant to go towards the upkeep of LHR, not BA's coffers.

Additional: Notwithstanding the fact that they're not actually witholding any of the tax element - since the customer is not actually going to be travelling on the original ticket, then they're not presenting any further "wear and tear" on the airport. Therefore, the airport shouldn't actually be due an "upkeep" fee for that customer on the original journey.

Cheers

Michael

HMRC refers to revenue ( previously known to most of us as inland revenue) and customs. Customs got their bums spanked 18 months ago after many cases involving corrupt customs officers were exposed in the Court of Appeal.
So, the blair government decided to disband the old Customs arm of enforcement and prosecution and create a new agency, HMRC. Trouble is it looks like customs, smells like customs, sounds like customs .... and as was proved beyond any doubt, they were bent.
i bet you're liable for the HMRC tax based on intent.

Would you like to provide any evidence that HMCE, now part of HMRC, is/was "bent"?

[Decker]

I suspect members might be (See here for an example) but the body corporate cannot be said to be.

Flip side then - what does BA (& other airlines) do with the "revenue" collected as "tax" if the customer doesnt fly & doesnt claim the tax back??
Hand it over?? Post customer as "no show" & fail to declare the tax portion??

Also - just because someone states something in their T&Cs, whilst technically it makes it legally binding - if its not legally right in the first place then it doesnt matter.

Charging an "admin fee" greater than the refund you will be due certainly doesnt sound right to me , although no doubt there is a legal loophole that allows it. If so, then surely its something that needs to be highlighted to expose those who do it.

To me it still comes across as a form of tax evasion. By offering the customer a refund on the tax, but charging a fee greater than the amount of tax - instead of losing 100% of the amount, they are then showing the tax was refunded whilst with the other hand they are boosting coffers. Whilst this then becomes liable for tax , the same amount of money is taxable @ a lower rate of tax. Accordingly, it would be in an airlines interest to push more non-refundable tickets whilst making customer aware that they can still reclaim the tax portion in event of cancellation.

While currently this may well be legal, surely its very unethical (although when did major companies put ethics ahead of profits).

Originally posted by williestott
Flip side then - what does BA (& other airlines) do with the "revenue" collected as "tax" if the customer doesnt fly & doesnt claim the tax back??
Hand it over?? Post customer as "no show" & fail to declare the tax portion??

The relevant page, with links to more in-depth doucments is here

It seems to me that for a no-show, BA would not be required to include that journey on their APD return, and no APD would therefore be due. The money collected is then retained as revenue by BA - this goes back to what p17blo has said above.

To me it still comes across as a form of tax evasion. By offering the customer a refund on the tax, but charging a fee greater than the amount of tax - instead of losing 100% of the amount, they are then showing the tax was refunded whilst with the other hand they are boosting coffers. Whilst this then becomes liable for tax , the same amount of money is taxable @ a lower rate of tax. Accordingly, it would be in an airlines interest to push more non-refundable tickets whilst making customer aware that they can still reclaim the tax portion in event of cancellation.

While currently this may well be legal, surely its very unethical (although when did major companies put ethics ahead of profits).

I don't think this can be called tax evasion. If the journey doesn't happen, then no APD is payable by BA - they are justified in returning that tax, but charging their admin fee to cover their costs in doing so. As you point out, the net result is to swap a sum of money which has to be passed on entirely to the goverment, to a sum of money for which only 30% or so is passed to the Government (assuming BA post a profit that year). In that case, it makes no difference to BA if you request the refund or not - they make their £30 in revenue and you get nothing back! Harsh but there we go!

Whilst this seems to be a technically correct way of doing things, it strikes me as the kind of thing which will wind up lots of Daily Mail/Which readers, they will campaign, and the Goverment will respond with a specific consumer protection law to do something about it - possibly - so perhaps those of us affected should start lobbying our MPs now...

I have to say it winds me up, and I don't read the Daily Wail! If I return, say, a TV unused and get a refund, they don't charge an admin fee. Surly it is the same here. You are returning the airticket unused. Because of the terms of purchase they keep all/part of the airfare. Hopefully they resell the seat and recoup their money that way - they may even make an extra profit if your ticket was inflexible. Nothing to complain about there as you know about the booking conditions when you buy the ticket. However to withold the tax (or to do so by a back door method of admin charges) seems pretty rich to me. It may be legal & it certainly insn't evasion or defrauding. But it still isn't right IMHO.

BTW Decker - good point. There will always be rotten apples. However, as you say, that does not make the whole department rotten.

[RichardMannion]

Willie, onionz and Sailor - I think you've all captured the essence of what I was trying to say. If I don't take my flight, I'd much rather the APD and other groudn taxes such as UB be passed on to help pay for the improvements to the airports, instead of BA and the like retaining it as revenue.

HMRC replied to me saying they are looking in to it, I also have a mail ready to go to a few journo's regarding this. I think the issue is that very few people know about it and that taxes can be refunded per se.

Thanks,
Richard

[RichardMannion]

Response from HMRC so far:

Hopefully the below paragraphs from our official guidance will clarify the HMRC position.Although I am afraid it is in official "tongue"

When claims for repayment of overpaid tax or duty are made,the Department is entitled to refuse repayment if the claimant would be unjustly enriched.
Broadly speaking this is where a claimant would get a windfall profit,because the tax or duty that they are seeking to recover was effectively paid by the consumer and the claimant is not planning to pass the refund back to the consumer.It was introduced by CEMA section 137A,which was inserted by Finance Act 1995 in relation to all payments made on or after 1 December 1995.

Before the unjust enrichment provisions were amended by the Finance Act 1997,a business which accepted that it would be unjustly enriched would receive a refund of sums overpaid as tax if it agreed to reimburse those consumers which for practical purposes had paid the tax.However,the law did not say how that refund should be made,nor did it provide a sanction where a business reneged on the agreement.

"Schedule 5,Part 1 of the Finance Act 1997 gave us powers to introduce a reimbursement scheme("the Scheme").The reimbursement provisions have been incorporated in the Aircraft Operators(Accounts and Records) Regulations 1994 as regulations 9 to 16 by the Aircraft Operators(Accounts and Records)(Amendment)Regulations 1998 which became law on 11 February 1998.

The scheme is not compulsory as it gives those registered aircraft operators who accept they would be unjustly enriched by receiving a tax refund a choice.They can either:

. do nothing;or

. claim the refund.But if they do they must abide by the terms of the scheme and reimburse consumers in a set manner.

Refunds must be made either in cash or by cheque in accordance with Regulation 11(c).Credit notes were specifically excluded because consumers may choose not to fly with the refunding carrier again.

Thanks,
Richard

Interesting response. I have to admit I was not aware of the unjust enrichment provisions. As i understand it airlines have to choose either to pay the money to the tax man and not reclaim it, or to reclaim it and repay to the customer in line with FA97 repayment scheme. The follow up I guess is what The Scheme says about administrative charges, and their potential use to negate the repayment to the customer.

Originally posted by RichardMannion

When claims for repayment of overpaid tax or duty are made

I think that is a crucial element.

This "unjust enrichment" only seems to apply where the airline is in a position to claim back the duty from HMRC after it has been paid to them.

But, as I referred to earlier, if the pax never travels, BA doesn't include it in their APD return and therefore doesn't pay any APD, then BA never lets the APD out of their grasp. Then what happens? They just retain it, it seems.

The one point that doesn't fit in with this is HMRC's specific mention of airlines, leading me to think that this regularly affects them. In that case, are we right to assume that airlines tend to file details for non-travelled flights in their APD return, and then attempt to claim it back?

[RichardMannion]

The plot thickens:

Air Passenger Duty(APD) is an excise duty levied on air operators.They are liable to HM Revenue & Customs(HMRC) for the duty(the rate is dependant on the destination and the class of travel)for each chargeable passenger carried on chargeable aircraft.The liability arises when the aircraft takes off from a UK airport with the chargeable passengers on board.

Although they are not required to do so by law,nearly all airlines pass on the duty charge to their passengers within their fare structure.It is normal commercial practice to charge their customers at the time of ticket sale & the ticket may show supplementary charges to the basic cost of the ticket.However,a charge identified on a ticket as being APD or something similar is not actually APD.It is a commercial charge,made in advance of the flight,to cover the airline's expected liability to APD.
If a passenger is unable to fly,for example,any money that may have been paid over by the passenger to the airline in respect of potential APD may be reclaimable.

However,that is a matter for them to explore with the airline and/or their insurers.
It is not a matter for HMRC.

If you wish to take the matter further,and you bought your tickets from a travel agent in Great Britain,you could try contacting:

The Association of British Travel Agents
68-71 Newman Street
London
W1T 3AH
telephone: 020 7637 2444
fax: 020 7637 0713
http://www.abta.com

Or you could try a consumer protection organisation,such as the Citizens Advice Bureau, http://www.citizensadvice.org.uk who may be able to advise you on how to progress your case.

Now that is interesting, so basically all this time when we have tickets and you see the breakdown for taxes/duties/fees it is actually a commercial charge. I've gone back to clarify a few points as the airlines are passign this 'commercial' charge off as a tax.

Thanks,
Richard

[Decker]

Now that IS interesting. Obtaining money by deception. "Please give me this money that I am collecting on behalf of the government." "No you're not - ooh you big fibber".

Get that blokey out of the Saturday Guardian onto it

[RichardMannion]

Can you imagine - oh you want to buy that? You need to pay Decker tax on that. You cn't go passing off commerical charges as taxes.

What bloke from the Guardian - I've already done the formalities and sent a request out to WatchDog. I'm hoping that one of the press people pick up on this, like I said originally, most people are blissfully unaware of the situation.

Thanks,
Richard