Group owned aircraft/ renumeration

Nigel Hitchman · Post by **Nigel Hitchman** » Fri Aug 28, 2009 1:42 pm

In the Aug issue of Light Aviation there is a letter from the CAA regarding group onwed aircraft and apparent illegal renumeration. I think I understand what is written in the letter, but Im not sure as its been written in legalese, rather than plain English!

It would appear to say that as sole owner of my Piper Cub, if I fly with a friend and he gives me half the cost of the fuel, or even half the operating costs for that flight. (hangarage and insurance divided by anual flight hours would appear to be legal) this is legal.

However if I was to sell a share in my aircraft to someone, then only that person could pay for half my fuel, if I took up a friend who was not a shareholder he could not pay me anything and if he did this would constitute aerial work and make the flight illegal.

If my interpretation of this is correct, then it is crazy. Surely whether its a group aircraft or sole owned aircraft I should be albe to share the cost of the flight. This rule needs to be changed.

Where is the logic in this rule, surely there is no safety impact whether the aircraft is group owned or not and any rules must be justified on grounds of safety.

Simon Clifton · Post by **Simon Clifton** » Fri Aug 28, 2009 4:18 pm

Nigel

I agree that letter is unclear, it would be much more meaningful if the details of the case in question were given. I'm sure that could be done without infringing the rights and privacy of those in question.

Incidentally, I spoke to the CAA this week about group ownership restrictions on paid-for training (see another thread), and got an enlightened description of how the CAA group rule is supposed to work.

In essence, I understand the policy is to stop commercial operators taking advantage of our lower certification standards by falsely claiming 'group' ownership as a way of circumventing what is 'aerial work'. I don't think this is news, but the way it is embodied in various documents has required clarification (and could do with further clarification again!)

The CAA man said to me if you could stand up in court and prove to the judge you were not doing aerial work, then you would be okay. I think the judge would allow your friend to pay for his part of the fuel, but not the group in the written letter.

Cheers

Simon C
~~~~~~

Nigel Bailey · Post by **Nigel Bailey** » Sun Aug 30, 2009 10:26 pm

Well I'm glad to hear that others found the CAA explanation difficult to understand. My brain tends to switch off as soon as I try reading this sort of jumbled up stuff. Why on earth can’t these people write it in plain English? There are two reasons why in my view.. 1) They don’t want us to understand the point. 2) They don’t understand it themselves!
On a similar vein, I have heard that there are some issues surrounding Non-Equity shares, but when I tried to find out a clear explanation, I was met with more jumbled up rubbish.
Come on CAA, say it how it is!

Brian Hope · Post by **Brian Hope** » Mon Aug 31, 2009 7:05 am

Hi Nigel, my understandig of the letter is different to yours! It was not about you flying the aircraft and sharing the costs with your passenger, it was about 'renting' your aircraft to a non group member (group member means somebody who has paid for and thus owns an equal share of the aircraft). Let us take a hypothetical case. A group has an instructor member who checks out group members to keep them current, and also new group members when they join. He then sells his share, but the group retain his services as a check pilot, and as he's their mate, they allow him to continue to fly the aircraft and just charge him the hourly fixed and fuel costs. They are in effect 'renting' him the aircraft, albeit on a non profit basis, but it falls outside of Article 162 which only permits group members to pay fixed costs. If he had just paid fuel costs he would have been OK.
Trying to get around this by making somebody a non equity group member (say by selling them a nominal £1 share), is also illegal as group members have to be equal shareholders.

steveneale · Post by **steveneale** » Mon Aug 31, 2009 8:21 am

I agree with Nigel. That is what is said in the letter. Accepting Brian's interpretation is what was probably intended, yet again we have more proof the ANO is not fit for purpose especially WRT permit aircraft. Interpretation in our mag or over the phone should not be necessary. What sort of regulation is that? There is no reason for the ANO to differentiate between non public transport CofA and permit aircraft in this and the majority of other matters. Separate references to Permit aircraft in these sections should be removed. At the moment the ANO simply panders to pedants.

Steve

Mike Cross · Post by **Mike Cross** » Tue Sep 01, 2009 2:07 am

Trying to get around this by making somebody a non equity group member (say by selling them a nominal £1 share), is also illegal as group members have to be equal shareholders.

Nope
They each have to own at least 5%, which is not the same thing at all.
Art 162(2)

(2) An aircraft falls within this paragraph if it is owned:
(a) jointly by persons (each of whom is a natural person) who each hold not less than
a 5% beneficial share and:
(i) the aircraft is registered in the names of all the joint owners; or
(ii) the aircraft is registered in the name or names of one or more of the joint
owners as trustee or trustees for all the joint owners and written notice has
been given to the CAA of the names of all the persons beneficially entitled
to a share in the aircraft; or
(b) by a company in the name of which the aircraft is registered and the registered
shareholders of which (each of whom is a natural person) each hold not less than
5% of the shares in that company.

Steve Brown · Post by **Steve Brown** » Tue Sep 01, 2009 9:22 am

So no group can be larger than 20 members.
Can anyone explain to me how no-equity share groups work please.

Mike Cross · Post by **Mike Cross** » Tue Sep 01, 2009 10:42 am

Easy, the aircraft has to be maintained to PT standards. This of course means that it can't be on a Permit.

A "no equity" group is operating the aircraft in the same way as a flying club or private owner who hires his aircraft out and the same rules apply.

The concession that allows group members to pay for the use of the aircraft only applies if the conditions in Art 162(2) are met.

It might help to understand that the airworthiness rules that apply depend on the "Purpose of the flight". If it is Public Transport or Aerial Work then the aircraft must be appropriately maintained. Therefore the concessions define circumstances in which the flight is deemed to be a Private Flight.

Art 162 deals with the concession on group ownershhip and reads in its entirety

Public transport and aerial work - exceptions - jointly owned aircraft
162 (1) A flight shall be deemed to be a private flight if the aircraft falls within paragraph (2)
and the only valuable consideration given or promised in respect of the flight or the
purpose of the flight falls within paragraph (3).
(2) An aircraft falls within this paragraph if it is owned:
(a) jointly by persons (each of whom is a natural person) who each hold not less than
a 5% beneficial share and:
(i) the aircraft is registered in the names of all the joint owners; or
(ii) the aircraft is registered in the name or names of one or more of the joint
owners as trustee or trustees for all the joint owners and written notice has
been given to the CAA of the names of all the persons beneficially entitled
to a share in the aircraft; or
(b) by a company in the name of which the aircraft is registered and the registered
shareholders of which (each of whom is a natural person) each hold not less than
5% of the shares in that company.
(3) Valuable consideration falls within this paragraph if it is either:
(a) in respect of and is no greater than the direct costs of the flight and is given or
promised by one or more of the joint owners of the aircraft or registered
shareholders of the company which owns the aircraft; or
(b) in respect of the annual costs and given by one or more of such joint owners or
shareholders (as aforesaid);
or falls within both sub-paragraphs (a) and (b).

Therefore if you meet the criteria you qualify for the exemption and the flight is a Private Flight. A Permit aircraft can be used for a Private Flight so you are OK.

Articles 157 to 163 contain most of what you need in the way of rules and exceptions.

Nigel Hitchman · Post by **Nigel Hitchman** » Thu Sep 03, 2009 12:30 pm

Brian,
thanks for the explanation of how you read the letter. Interesting that we both read the same letter and have a totally different interpretation of it! Is that because you have more background information or edited the letter? Or is it just because the letter was so badly written it is unclear what it means!
Thanks to Mike for providing some of the rules, no wonder people get it wrong if they are written like this! Im wondering what an "un-natural person" is, as it says each shareholder has to be a "natural person".

So this would appear to mean that a few years ago when I let someone fly my Cub for free if they paid half the hangarage and put fuel in it, this was illegal!! Although it could be argued that paying for hangarage is not paying for the aircraft.
So would it also be illegal if I said you could fly my aircraft for free if you paid £50 of my house mortgage each month?

Or what about you can fly my aircraft for free, if I can fly yours for free? As insurance is compulsory you are having to pay for me to be insured on your aircraft as part of the deal, so effectivly you are paying me!!

So it would seem that in order to let someone fly my aircraft and charge them some of the fixed costs, I have to register it with me as the trustee of the group and sell 5% minimum shares, does this just mean that I change the name on the registration form and my mate gives me 5% of the cost of the aircraft and I write to the CAA to tell them that he is a shareholder, or does it mean I have to set up an official "trust" which no doubt costs money!

All seems to me lots of bullsh*t for no reason! Surely if someone is paying a monthly and hourly cost that can be justified as a share of the fixed costs- monthly things like hangarage +insurance, hourly things like engine fund and oil, then this should be sufficient. Aerial work should be defined as if Im renting out the aircrat per hour, with no requirement to pay monthly costs and a profit element with no justification of costs.
That would seem logical and fair, but no doubt not what the CAA want to justify their bureaucracy.

J.C. · Post by **J.C.** » Thu Sep 03, 2009 1:27 pm

This is all very interesting.
A group member who worked for the local council was co-ursed ( against his will) into flying the aircraft that he had a share in to provide evidence in the (rigged) appeal hearing at well known airstrip that I used to frequent.
He was on full pay of the council at the time. The fuel costs etc were met by the council.
Therefor my contention was that it was an illegal flight. He bore no part of the costs, and was being paid by the council at the time of the flight.
The CAA assured me that this was an illegal flight, and I challanged the council, on the basis that evidence gathered as part of an illegal act was not admissable in court.
However, the council's barrister wrote to the CAA and another person within the same department assured them in writing that it was a "grey area" and not one robust enough for them to take the pilot to court.

Talk about covering your own arse!

Strikes me the CAA are a bit like speed cops ..tax collectors in discuise!
They squirm and twist at every oppertunity and thats why everything they print is in double dutch

Mike Cross · Post by **Mike Cross** » Thu Sep 03, 2009 4:07 pm

The wording tends to be

valuable consideration given or promised in respect of the flight or the purpose of the flight

It has in the past been suggested that this means

"Can you fly over my house and take a picture of it if I give you something towards the petrol" is illegal because the money has been promised for the purpose of the flight, i.e. to take the picture.

If however you fly over his house, take the picture and show it to him and he says "That's a great picture, can I have it and give you something towards the petrol" is legal because the payment was not for the flight or the purpose of the flight. It was for the picture you took. Whether or not the flight took place was not dependent on the money or the offer of it.

All very grey and the only people who can decide on whether or not it was illegal is a Court. On the face of it what the Council did probably resulted in an illegal flight but decisions to prosecute are taken on whether the prosecuting authority wants to do it, whether it is in the public interest to prosecute and what the likelyhood is of achieving a conviction rather than whether or not a complainant feels that the law has been broken.

In your particular case it was up to you to convince the Court that the evidence was inadmissable and you did not succeed.

Brian Hope · Post by **Brian Hope** » Thu Sep 03, 2009 4:38 pm

Hi Nigel, the letter was as received from CAA.