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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: particular occupations: airline industry - flight duty allowances and sector pay

The Civil Aviation Authority Rules stipulate that flight crew must stay on the ground for a certain period between flights. To compensate for the inconvenience to staff airlines pay for accommodation, meals and ‘staying over’, commonly known as Flight Duty Allowance (FDA) or Sector Pay (SP). These can be very attractive to staff and can double an employee’s pay.

HMRC accepts that flight crews are entitled to tax relief for subsistence expenses incurred whilst travelling and as a result arrangements have been entered into whereby a proportion of the FDA/SP can be paid free of tax and the remainder subject to PAYE/NIC.

As this is slightly different from the normal guidance on ‘round sum allowances’, there has been a level of inconsistency in applying the ‘tax free’ element. To avoid industry problems HMRC will adopt a consistent operational approach. This applies to all staff involved in either

  • an EC Compliance Check, or
  • a PAYE Settlement Agreement (PSA).

Where a FDA/SP situation is evident staff should refer to ‘Flight Duty Allowance Agreements’ or contact the appropriate Employment Status & Intermediaries (ES&I) Team.