Judgment summary
This is a decision of the First-tier Tribunal (Tax Chamber) on HMRC's application to stay Virgin Atlantic Airways Limited's VAT appeals (TC/2025/01899 and TC/2025/02126) pending the final determination of a separate appeal by Avios Group (AGL) Ltd (TC/2025/00927) (1). The hearing took place on 17 March 2026 before Tribunal Judge Zachary Citron, with judgment released on 12 June 2026 (1).
Virgin's appeals concern the VAT treatment of payments received from 'earn partners' under its loyalty points scheme, which HMRC assessed under s73 as consideration for standard rated marketing and loyalty services, amounting to some £23.5 million across VAT periods 11/17-12/24 (7). Virgin contends the correct treatment is either as multi-purpose vouchers under Schedule 10B (from 1 January 2019) or as 'preliminary transactions' following MacDonald Resorts, meaning no VAT arises on issuance of points, only on redemption (8-16).
Avios has a similarly structured but not identical appeal concerning its own loyalty scheme, listed for hearing 16 November to 4 December 2026, raising overlapping arguments based on Schedule 10B, MacDonald Resorts, Findmypast and Go City (18-30). HMRC applied for Virgin's appeals to be stayed behind Avios' appeal, applying the test in RBS Deutschland Holdings GmbH v HMRC (1, 51).
The Tribunal found very considerable similarity between the two loyalty schemes and the legal issues raised, including reliance on the Vouchers Directive/Schedule 10B and MacDonald Resorts (55). It rejected Virgin's arguments that differences between the schemes (redemption mechanics, Virgin's dual airline/loyalty business, points expiry, companion vouchers, legitimate expectation arguments) undermined the case for a stay (57-65). The Tribunal concluded that final determination of Avios' appeal would materially assist resolution of the issues in Virgin's appeals to a high degree of probability (66), and that the balance of fairness and justice favoured a stay despite potential delay (68-70).
Background
Virgin's loyalty scheme business involves issuing points to scheme members on their purchasing goods or services from 'earn partners', with points redeemable for rewards provided by 'redemption partners' (6). HMRC issued assessments under s73 in respect of Virgin's monthly VAT periods 11/17-12/24, treating payments received from earn partners as consideration for standard rated supplies of marketing and loyalty services, with the amount assessed being some £23.5 million (7). Virgin's appeals were made in April and May 2025, and HMRC applied for a stay prior to producing a statement of case (7).
Avios Group (AGL) Ltd operates a similar, though not identical, loyalty scheme business and has its own appeal (TC/2025/00927) concerning the VAT treatment of payments from its 'issuance partners' on the issue of points, covering VAT periods 03/18-02/24 (18). Avios' appeal was made in February 2025 and is listed to be heard by the Tribunal on 16 November to 4 December 2026 (18). HMRC issued both 'preferred' assessments (treating payments as consideration for standard rated marketing and loyalty services) and 'alternative' assessments (treating output tax as due only on redemption) in Avios' case (18).
Core dispute
The issue before the Tribunal was whether Virgin's appeals should be stayed pending the final determination of Avios' appeal, applying the tests set out in HMRC v RBS Deutschland Holdings GmbH [2007] STC 814, namely whether determination of the other case would be of 'material assistance' in resolving the issues in Virgin's appeals, and whether it would be 'expedient' to grant a stay (50-54).
HMRC argued that the two loyalty schemes and the legal issues they raised, particularly reliance on Schedule 10B (multi-purpose vouchers) and MacDonald Resorts, were sufficiently similar that determination of Avios' appeal would materially assist resolution of Virgin's appeals (55). Virgin argued that there were relevant and important differences between the two loyalty schemes, including differing redemption mechanics, Virgin's combined airline and loyalty business, differing points expiry rules, and additional issues in Avios' appeal such as companion vouchers and legitimate expectation, such that a stay would not be appropriate (57-65).
Court findings
The Tribunal found very considerable similarity between Virgin's and Avios' loyalty scheme businesses, both involving the same four types of business entity (operator, members, earn/issuance partners, redemption partners) in similar relationships, and very considerable overlap in the legal issues raised, particularly reliance on the Vouchers Directive/Schedule 10B and MacDonald Resorts (55).
The Tribunal held that Avios' grounds of appeal and HMRC's statement of case, although redacted in places, were sufficiently detailed to allow a fair assessment of 'material assistance' without needing full evidence in both appeals first (58-59). It rejected the argument that VAT cases are inherently too fact-specific for one determination to assist another, holding that a case can materially assist resolution of another even where facts differ in potentially material respects (60-61).
On the specific point about redemption mechanics and the Lyko Operations requirement of an obligation to accept points as consideration, the Tribunal found the documented differences between the two schemes did not undermine the high probability that consideration of Lyko Operations in Avios' appeal would assist considerably in resolving parallel issues in Virgin's appeals (62-63). Other differences raised by Virgin, including its combined airline and loyalty business, differing points expiry, companion vouchers, and legitimate expectation arguments (the latter itself stayed in Avios' appeal), were found not to affect the material assistance conclusion (64-65).
The Tribunal accepted there was uncertainty whether determination of Avios' appeal would assist resolution of certain distinct issues in Virgin's appeals relating to s73 (time limits, best judgment), but found these issues sufficiently secondary not to affect the overall conclusion (56, 67).
On expediency, the Tribunal weighed the risk of delay to the hearing of Virgin's appeals, potential deterioration of evidence, and delay to any recovery by Virgin of the £23.5 million assessed, against the benefit of material assistance from Avios' determination. It discounted the negative factors, noting that written evidence could be taken early and documents preserved, and that, given the appeals would be litigated at about the same time, the outcome of Avios' appeal was likely to influence either party's approach to Virgin's appeal regardless (68-69). The balance was found to favour granting the stay (70).
Outcome
The Tribunal granted HMRC's application and directed that the two Virgin appeals (TC/2025/01899 and TC/2025/02126) be consolidated into a single appeal under reference TC/2025/01899 (72). It further directed that the consolidated proceedings be stayed behind the case of Avios Group (AGL) Limited (TC/2025/00927), with all directions stayed for 60 days after that appeal has been finally determined (72).
Major issues / areas of contention
- Whether HMRC's application to stay Virgin's VAT appeals behind Avios' appeal satisfied the 'material assistance' limb of the RBS Deutschland test.
- Whether it was 'expedient', in the sense used in RBS Deutschland, to grant a stay given potential delay and deterioration of evidence.
- Whether differences between Virgin's and Avios' loyalty scheme structures (including redemption mechanics, points expiry, and companion vouchers) were sufficiently material to preclude a stay.
- Whether sufficient information about Avios' loyalty scheme was available to the Tribunal, given Virgin was not a party to Avios' appeal and some documents were redacted.
- Whether VAT cases are inherently too fact-specific for a determination in one case to materially assist resolution of issues in another.
- Whether the s73 'best judgment' and time limit grounds in the two appeals were sufficiently linked for determination of one to assist the other.