Britain is embroiled in a major diplomatic row with the United States over controversial plans for new taxes for transatlantic fights, The Daily Telegraph reported yesterday.

An official letter sent by the US Embassy to the British government, which has been leaked to the daily, reveals the Americans who have "deep concerns with the proposal" threaten the British Treasury with legal action over the planned tax increase, the daily said.

The British government is planning to sharply increase the amount of money raised from airline taxes in a move that will net an extra 520 million pounds (about US$1.04 billion) annually.

Under the plans unveiled by Finance Minister Alistair Darling last year, the way in which flights are taxed will be changed from autumn 2009. Instead of each passenger paying a fixed levy per flight, the Treasury will instead tax each plane. Airlines will then pass on the tax to passengers.

Airlines already struggling to deal with record fuel prices calculate that the tax per person on a flight to America or other long-haul destinations will rise from 40 pounds to about 100 pounds from next year, according to the report.

The issue is very sensitive as airlines, particularly in America, are suffering from the sharp rise in fuel prices and travelers are faced with a range of higher fees and fares for this year's summer holidays.

The six-page letter sent on April 15 provides a detailed rebuttal of claims made by Darling that taxes on flying are being increased to produce environmental benefits, the daily said.

"The Treasury's proposal, although cast as an environmental measure, appears in reality to constitute nothing more than a device for generating additional revenue from the airline community," the daily quoted the letter as saying.

"There is no linkage between the funds collected from airlines and the mitigation of any environmental impact of airline emissions or any other environmental problem. Nor are any data provided to justify the levy based on an assessment of damage from aircraft emissions," the letter states.

The American embassy warned the Treasury that the "proposed duty raises serious legal concerns," threatening to damage Britain's competitiveness.

The unusual attack from the Americans ahead of a visit to Britain by US President George W. Bush next week is understood to be causing serious concerns within Downing Street, it said.