Government threatened with legal action after giving Flybe a £10m ‘tax holiday’

Flybe confirmed it has agreed a financial arrangement with HM Revenue and Customs to defer tax payments of “less than £10 million”.

The government intervention on Tuesday has reportedly saved Flybe from collapse. This deal gives the airline a few more months to pay outstanding taxes.

HMRC and the government said all tax arrangements are “confidential” but deferred tax arrangements were common. Flybe added:

This is a standard Time to Pay arrangement with HMRC that any business in financial difficulties may use.

Lack of transparency

As a result of the decision, rival airlines have complained and are also demanding a tax holiday.

British Airways owner International Airlines Group (IAG) has written to the European Commission, claiming the arrangements breach state aid rules. IAG bosses have also written to the government demanding answers over the exact nature of the deal struck with Flybe. They have accused ministers of a “lack of transparency”.

Meanwhile, Ryanair chief executive Michael O’Leary said he’d take the government to court if other airlines weren’t also given a tax holiday. He also called for answers over the nature of the Flybe deal.

In a letter to chancellor Sajid Javid, O’Leary said:

Should you fail to confirm these facts within the next seven-day period, please be advised that Ryanair intends to launch proceedings against your Government for breach of UK and EU competition law, and breach of state aid rules.

More time to pay

The government said it stepped in to save the airline due to its network of domestic flight routes, with many not operated by rival airlines.

The airline’s chief executive Mark Anderson told PA on Thursday that he was in talks with the government about a loan which would give them more time to pay the tax owed.

However, despite the climate crisis, the government has also reportedly been considering a cut to Air Passenger Duty (APD) tax. Airlines continue to be among the biggest producers of carbon emissions. Being lenient towards them on tax raises questions about this government’s commitment to tackling climate change.