APD8700 - Special accounting schemes: Analysis and 'weighting' of sample results

Agreeing flight groups

When the trader has completed a survey or sample of passengers and flights, you should examine the results in order to confirm and agree which flights may be grouped together, and to assist the trader (if necessary) in calculating the percentages which will be used in the scheme operation.

In general, flights with similar percentages of passengers carried at each rate of duty and within each exemption category which is included in the Scheme, may be grouped together to improve accuracy and reduce the number of calculations the trader has to complete at each period end.

A number of factors may affect the percentages of passengers carried at different duty rates or within different exemption categories. Examples include seasonality, routes, time of day and time of week. If any of these are felt to be significant, you should consider sub dividing the sample to ensure that only similar flights are grouped together. For example, if an airline operates to two different destinations and the percentage of onward connecting passengers varies with each destination, then it would be appropriate to divide the sample into two separate groups. (See also example in (b) below).

The number of passengers in the group should also be taken into account, as this affects the amount of revenue at risk. (See example in (b) Note 2 below.) A small group is much less likely to affect the accuracy of the scheme in a major way. In many cases it would be difficult to take account of all the factors above, as the resulting groups would become unmanageable. The CAT take account of the most significant factors only. Any remaining factor not considered when grouping can be taken into account later by “weighting” the sample results.

“Weighting” of sample results

After flight groups are agreed, minor fluctuations may still remain within each group and it is important to “weight” the results correctly to ensure as accurate a duty payment as possible. This means that the average of the percentages at each rate and for each type of exemption should be “weighted” to take account of the number of passengers travelling at different times of the day/week, or on different routes/flights within the agreed group. This is important, as the trader may otherwise make an inaccurate duty payment, which cannot be corrected if the trader has operated the scheme as laid out in the scheme agreement.

Example

Total passengers in flight group = 320

A weighted average would be calculated as follows:

Passengers at £10 as a percentage of total
= 245 x 100 = 76.57% weighted average
320
Passengers at £nil as a percentage of total
= 75 x 100 = 23.43% weighted average
320

Note: If instead of weighting, you looked at each flight individually and said 16.7% of the 0900 flight and 27.5% of the 1800 flight were exempt, giving an average of (16.7 + 27.5)/2 = 22.1% exempt overall, the scheme would be inaccurate. This is because you would not have taken account of the higher number of passengers (including a higher percentage of exemptions) on the later flights.

Sample grouping and weighting

Example

Airline XYZ requires a special accounting scheme to account for all their flights from the UK. They will use the results of the sample to calculate the percentage of passengers carried at each rate of duty, and the percentage of passengers exempt due to the Air Passenger Duty (Connected Flights) Order 1994. The following details their sample results, from which the other exemptions found in the sample (infants, positioning crew etc) have already been deducted (you will have to ensure this is the case when calculating/checking percentages for your traders, and they will also have to do this at each period end before the duty calculation is carried out).

The sample size and period was agreed before the sampling commenced and all flights and all passengers carried during the agreed period for the sample for each route are shown below.

No flight groups have been agreed prior to the sample as the trader was unsure as to the breakdown of passenger numbers between the rates of duty and within the connecting passengers.

a. Sample results

The total number of passengers carried on each route (less exemptions that are not to be included in the scheme) for the entire sample period are shown, as there is little fluctuation between the days of the week. This was agreed with the trader.

b. Results converted to percentages (in order to agree flight groups)

The results are calculated as a percentage of the passengers carried on each route. (For example to calculate the percentage of the exemptions on the 0600 flight using the columns above to calculate the percentage of connecting passengers:

A x 100 = ? % for example 95 x 100 = 2.31%.

(A+B+C) (95+0+4022)

Similarly to calculate the percentage of B or C of the whole route, put B or C over the sum of the passengers carried on the route). This gives the following table:

Having studied the percentages, each week the flights could be grouped as follows:

Group 1: 0600 and 0900
Group 2: 1000 and 1100
Group 3: 1500 and 1800 (see Note 2 below)
Group 4: 1900 and 2000

In each case, similar percentages occur in each flight group.

Note 1: When agreeing groups, you may have to study the breakdown of percentages of passengers carried on different days/time of the week, routes etc. and if you are uncertain as to whether the proposed group can be accepted, contact the Transport Taxes Team who will discuss the problem with KAI. (In general, any method of grouping will be acceptable if each flight within the group has similar percentages).

Note 2: In the above case Group 3 has the highest number of passengers and also the greatest difference between the percentages of passengers carried. After consultation with the Transport Taxes Team and KAI (as it is important to get the larger groups right), this group was agreed initially, but should be reviewed after 3 months.

c. “Weighting” the sample results within flight groups

Once the final flight groups have been agreed, the percentages to be applied within those groups should be “weighted” to take account of the variation in the number and percentages of passengers carried within each flight group.

Using the results shown in (a) above, the total number of passengers carried within each flight group at each rate and exempt due to the Air Passenger Duty (Connected Flights) Order 1994 can be calculated and are shown below.

These can then be calculated as weighted percentages using a similar formula to the one used in (b) of paragraph 7.8.3.

For example to calculate the weighted percentage of connecting passengers in group 1:

B x 100 = weighted percentage that is 395 x 100 = 3.94%

A 10037

Table of Weighted Percentages to be included in the Special Accounting Scheme Agreement

Percentages should be rounded to two decimal places and should always add up to 100% within the group.

Assistance

In cases of uncertainty the CAT will seek assistance from the Transport Taxes Team (and through them KAI).