Business people rushed to snap up Cessnas and Learjets before zero rating was ended in January
Some of Britain's richest businesses and individuals spent an extra �1bn on private jets in the last three months of 2010 in a desperate bid to beat the rise in VAT which took effect in January.
The colossal spending spree on everything from �2.4m Cessnas to �48m Learjets revealed a hunger for private aircraft from a community of buyers, many of them City bankers who for the previous two years had lived with a self-imposed no-fly zone.
The government raised VAT on private jets, which were previously zero-rated, along with the more general rise in the tax from 17.5% to 20%.
Several coalition ministers and opposition MPs were known to be shocked the zero rating had stayed under the Treasury's radar, allowing wealthy executives to enjoy the benefit of a massive tax loophole for decades.
Office for National Statistics figures showed the rise in tax led to a �2bn collapse in spending on executive jets in the first three months of this year, compared with the previous quarter.
Last year, 766 jets were delivered worldwide, of which two-fifths were to North American-based operators. Europe followed with a 24% share.
But an airline industry source said the new tax was a blunder that would encourage users to register their jets overseas. "By the very nature of the people who are purchasing these planes, they are mobile and don't care where their aircraft are registered. So it is a big loss to the UK," he said.
The huge swing in private jet buying created swings in the official figures. The buying freeze this year almost certainly exaggerated the decline in business investment. The sharp decline in aircraft sales accounted for almost a third of the improvement in net exports.
Source: http://www.guardian.co.uk/business/2011/may/25/business-jet-sales-soared-before-vat-increase
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