Annual cost

The Air Navigation Order 2016 defines the term (in the singular) in Schedule 1:

“annual cost”, in relation to the operation of an aircraft, means the cost (excluding any element of profit) of keeping, maintaining and operating the aircraft over the period of one year;

The Air Operations Regulation does not define annual costs; the phrase appears there only in the rule for competition flights and flying displays (Article 6(4a)(b)), not in the cost sharing derogation.

CAP 1590 (guidance), para 29 is clear on how they are treated: "‘Annual costs’ are not a direct cost and therefore cannot be included in the costs shared between pilots and passengers for a flight." Para 29 describes them as "the cost of keeping, maintaining, insuring and operating the aircraft over a period of one calendar year", and says they "are required to be paid by the pilot/operator of the aircraft with no contribution from passengers." The CAA's cost sharing web page adds "(including items like club membership fees for renters)".

In practice that means insurance, hangarage, maintenance, annual inspections and club subscriptions stay with you. Only the direct costs of the specific flight can be split. NCO.GEN.102(b) and ANO 2016 art. 13(2)(b) both require all costs other than direct costs to be paid by the pilot.