Rachel Reeves plots £1BILLION stealth tax on family holidays

Rachel Reeves announced a £300million package on Thursday to help families with the cost of living, including measures to reduce VAT on summer outings.

But behind the scenes, HMRC is preparing plans to charge 20 per cent VAT on the fees airports charge airlines for using runways and terminals, The Telegraph reported.

An airline industry source described the proposal as a "stealth tax", warning it would hit families already struggling to afford holidays during the cost of living crisis.

The new charge would be added on top of Air Passenger Duty, which currently costs between £15 and £106 for economy-class overseas flights depending on the distance travelled.

At Heathrow, where the standard passenger charge sits at approximately £24, the new tax could add nearly £5 to each ticket.

Ministers are also considering applying the measure retrospectively by up to four years, the maximum period allowed under current legislation. Such backdating would impose roughly £1billion in additional costs on carriers operating from Heathrow alone.

These charges are routinely passed directly to customers, meaning holidaymakers and business travellers would ultimately bear the burden.

HMRC is developing the proposals, which could be formally announced later this year. The Treasury declined to comment on the plans.

The summer relief measures will see VAT on entry to theme parks, zoos, museums, cinemas, soft play centres and theatres drop from 20 per cent to just 5 per cent between 25 June and 1 September. Children's meals will also benefit from the reduced rate.

According to government estimates, a family of four visiting a theme park would save £20, while cinema tickets would cost £1.50 less and family meals £2 cheaper.

The package includes free bus travel for children throughout August and a freeze on fuel duty for the remainder of the year. Import taxes on certain basic foodstuffs will also be reduced.

Ms Reeves stated the measures would be funded through increased taxation on global oil and gas companies including BP and Shell, which she said would generate "hundreds of millions of pounds a year".

The aviation sector responded with alarm to the proposed airport levy. Airlines UK warned that Britain already ranks among the world's most heavily taxed aviation markets and risks becoming even less competitive as costs mount.

"The only people cheering a move like this would be those running rival airports overseas," a spokesman for the industry body said.

Shadow business secretary Andrew Griffith condemned the proposal, stating: "Any additional tax on aviation is a tax on doing business, a brake on exports or an attack on hard-working families. No government on the side of growth would indulge this idea."

Industry figures have also raised doubts about whether the plan is legally viable, noting it may conflict with international aviation rules exempting airfares from VAT.

Heathrow is reportedly seeking legal advice and consulting tax specialists.