Virgin Atlantic Airways Limited v The Commissioners for HMRC [2026] UKFTT 890 (TC)

[2026] UKFTT 00890 (TC)Case No TC 09917
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 17 March 2026Date Judgment date: 12 June 2026
at Taylor House, London EC1
Appeal reference: TC/2025/01899, 02126
PROCEDURE – stay of proceedings – application by HMRC to stay this appeal behind Avios’ - similarities between this appeal and Avios’ appeal – applying the tests in RBS Deutschland– stay granted
Before
TRIBUNAL JUDGE ZACHARY CITRON
Between
VIRGIN ATLANTIC AIRWAYS LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentDavid Bedenham KC, instructed by Joseph Hage Aaronson for AppellantJohn Brinsmead-Stockham KC and Sam Way, instructed by the General Counsel and Solicitor to HM Revenue and Customs for RespondentsDECISION
[1]This is a decision on HMRC’s application for a direction from the Tribunal that these appeals of the Appellant (“Virgin”) (TC/2025/01899 and TC/2025/02126) be stayed pending the final determination of an appeal brought by Avios Group (AGL) Ltd (“Avios”), a third party. The wording proposed for the direction was: The matter is stood behind the case of Avios(TC/2025/00927) and all directions are stayed for 60 days after that appeal has been finally determined.[2]References in what follows to a section or “s”, or to a Schedule, are to a section of, and a Schedule to, Value Added Tax Act 1994, unless otherwise indicated.[3]I had a 489-page hearing bundle, which included, amongst other things(1) Virgin’s appeals(2) Avios’ appeal(3) HMRC’s statement of case in Avios’ appeal.[4]I also had a 289-page authorities bundle and skeleton arguments from both parties.[5]I structure this decision as follows:(1) I first summarise Virgin’s appeals, and then Avios’ appeal;(2) I then set out some relevant case law;(3) Finally, I discuss the competing arguments and explain my decision.

Virgin’s appeals

[6]Virgin’s appeals concern the VAT treatment of an aspect of Virgin’s ‘loyalty scheme’ business (and that of another company in Virgin’s VAT group, Virgin Red Ltd), a business which involves issuing loyalty “points” to scheme members on their purchasing goods or services from one set of counterparties (whom Virgin calls “earn partners”), and those points being redeemable by the members for rewards (i.e. other goods or services) provided by another set of counterparties (whom Virgin calls “redemption partners”). Virgin’s ‘loyalty scheme’ business makes money by charging earn partners on the issuance of points, which is offset (economically) by amounts Virgin pays to redemption partners for their providing rewards.[7]The particular aspect of this business, and its VAT treatment, at stake in Virgin’s appeals, is the treatment of transactions and payments as between Virgin and the earn partners: HMRC issued assessments under s73 in respect of Virgin’s monthly VAT periods 11/17-12/24, on the basis that payments that Virgin received from earn partners were consideration for standard rated supplies by Virgin of marketing and loyalty services. The amount assessed was some £23.5 million. Virgin’s appeals were made in April and May 2025. HMRC have made this application for a stay, prior to their producing a statement of case.

Virgin’s grounds of appeal

[8]Virgin’s grounds of appeal posit that the correct treatment of these transactions/payments was:(1) in the period from 1 January 2019: (a) as a multi-purpose voucher within the meaning of Schedule 10B; or alternatively (b) as preliminary transactions; and(2) in the period prior to 1 January 2019: as preliminary transactions;[9]Virgin’s grounds of appeal give more detail about the phrases I have set out in bold above:

Multi-purpose voucher

[10]The grounds set out that Schedule 10B, which gave effect to Council Directive 2016/1065 (the “Vouchers Directive”), applies to vouchers issued on or after 1 January 2019. Virgin contended that points issued in its loyalty schemes were vouchers, as defined in paragraph 1 (meaning of ‘voucher’) of Schedule 10B, since(1) points were an instrument in electronic form;(2) pursuant to agreements with Virgin, redemption partners were obliged to provide reward goods/services selected by members in exchange for the specified number of points;(3) the Virgin schemes’ T&Cs referred members to the Virgin website where the redemption partners and the reward goods/services were listed;(4) points were transferable by way of gift and were in fact transferred;(5) none of the exclusions apply to points.[11]As to paragraph 6 (multi-purpose vouchers: special rules) of Schedule 10B, the points were multi-purpose vouchers because they were not single purpose vouchers as defined by paragraph 4 (single purpose vouchers: special rules) of Schedule 10B – points could be redeemed against zero-rated and standard-rated reward goods/services and, therefore, at the time the points were issued, it was not known which “supply category” the reward goods/services would fall into.[12]The VAT consequences, according to Virgin, were that(1) there was no taxable supply on the issue of points because any consideration for the issue (or subsequent transfer) was disregarded, pursuant to paragraph 7 of Schedule 10B; and(2) on the redemption of points against reward goods/services, the redemption partners were to be treated as making a supply of goods or services to members for a consideration equal to the amount received from Virgin; and the VAT liability depended upon the particular “supply category” into which the reward goods/services fall (i.e. zero-rated or standard-rated), pursuant to paragraph 8 of Schedule 10B.[13]As regards ‘preliminary transactions’, Virgin’s grounds of appeal state that in the Explanatory Memorandum produced by the European Commission in respect of the proposal for the Vouchers Directive, the Commission described, as an example of a multi-purpose voucher, vouchers which can be redeemed for accommodation at establishments in several Member States. The Commission’s example is similar to the facts at issue in Case C-270/09 MacDonald Resorts Ltd v HMRC (“MacDonald Resorts”), which concerned the VAT treatment of “points rights” under a timeshare scheme which were redeemable for stays at properties located in various Member States.[14]Virgin’s grounds go on to state that in MacDonald Resorts the Court of Justice of the EU held that:(1) the purchase of “points rights” was not an aim in itself for the customer since the customer concluded the initial contract not with the intention of collecting those points, but in order to be able to exercise them in order to temporarily use a property or to stay in a hotel or to use another service: see [24];(2) it was only at the moment of redemption that the customer receives consideration (the actual service) for which the points rights are acquired and the supply of services takes place: see [25] - [28];(3) the customer does not know what the points will be redeemed for at the time of issue: see [29];(4) the factors necessary for VAT to arise are not present at the time of issue, in particular because the precise goods/services against which the points will be redeemed has not yet been identified: see [30] – [31];(5) the real service is only obtained when the customer redeems the points and the chargeable event occurs such that it is only possible to determine the VAT treatment at the time of redemption: see [32] – [33].[15]Virgin’s grounds note that MacDonald Resorts was considered and confirmed by the Advocate General in Case C-607/20 GE Aircraft Engine Services Ltd v HMRC (a pre-Schedule 10B vouchers case).[16]The VAT consequences, Virgin contends, were that, prior to the introduction of Schedule 10B, the VAT analysis was exactly the same, following the reasoning of the Court in MacDonald Resorts, namely:(1) there is no taxable supply on the issue of points; and(2) on the redemption of points against reward goods/services, the redemption partners were to be treated as making a supply of goods or services to members for a consideration equal to the amount received from Virgin; and the VAT liability will depend upon the particular reward goods/services against which the points are redeemed (i.e. zero-rated or standard-rated goods/services).

Virgin’s other appeal grounds

[17]Further grounds of appeal advanced by Virgin were:(1) the VAT assessments that pre-dated 1 April 2025 were invalid because, at the time of their issuance, it did not “appear to the Commissioners” that the relevant VAT returns were incorrect within the meaning of s73(1);(2) a number of the assessments were made outside of the 2 year time limit provided for in s73(6)(a). To the extent HMRC rely on the one year rule in s73(6)(b), Virgin’s grounds say that HMRC should make clear what evidence of facts, sufficient in their opinion to justify the making of the assessments, they rely upon and when they say those facts first came to their knowledge;(3) a number of the assessments did not appear to have been made within the 4 year period provided for in s77(1). Virgin’s grounds say that HMRC should make clear the date on which they say each assessment was made;(4) the assessments were not made to best judgement. In particular, the methodology used to compute input VAT on "redemption services" was inconsistent as between non-UK redemption partners (which services have been treated as standard rated) and UK redemption partners (which services have been treated as standard rated where the underlying reward was a standard rated item and zero-rated where the underlying reward was a zero-rated item);(5) the assessments were wrong in amount. Avios’ appeal[18]Avios has an appeal in respect of the VAT treatment of its ‘loyalty scheme’ business, which operates on a similar (though certainly not identical) basis to Virgin’s ‘loyalty scheme’ business. (One difference between Virgin’s and Avios’ loyalty schemes was that members of Avios’ scheme, in addition to obtaining points by purchasing goods or services from the equivalent of Virgin’s ‘earn partners’ (called ‘issuance partners’ in Avios’ documents), could also purchase points “directly” from Avios). As in Virgin’s appeals, the aspect of Avios’ business, and its VAT treatment, at stake is the transactions and payments upon the issuance of points, as between Avios and issuance partners. HMRC issued assessments under s73 in respect of Avios’ monthly VAT periods 03/18-02/24. They issued so-called “preferred” assessments on the basis of HMRC’s primary analysis: that Avios was liable to account for output tax on payments from issuance partners on the basis that the payments were consideration for a standard rated supply by Avios of marketing and loyalty services. HMRC also issued so-called “alternative” assessments on the basis of HMRC’s secondary (or alternative) position: that Avios was liable to account for output tax only in relation to its supplies on the redemption of points. Avios’ appeal was made in February 2025. It is listed to be heard by the Tribunal on 16 November - 4 December 2026.

Avios’ grounds of appeal

[19]Avios’ grounds of appeal start with stating that the parties agreed that(1) points represented rights, exercisable by members against Avios, for rewards provided by redemption partners; and(2) it was not known at the point that a point is issued (and paid for by either an issuance partner or a member), which specific good or service (i.e. which specific reward) it will be exchanged for.[20]Avios’ grounds (like Virgin’s) contend that VAT should not be accounted for when points are issued, but rather, when points were converted into an actual good or service i.e. at redemption. Avios considered this consistent with the principle that VAT is collected on an actual supply (i.e. on actual consumption). Avios considered that its position was supported by both:-(1) MacDonald Resorts and subsequent case-law; and(2) the VAT rules concerning vouchers (and, once again, it will be noted that this is the same law that Virgin relies on). Reliance on MacDonald Resorts and subsequent case-law[21]Avios’ grounds also refer to the decision of the Court of Session in Findmypast Ltdv HMRC [2017] STC 2335 where, it was said, customers purchased credits (sometimes referred to as units or vouchers) that could be used to purchase services from a genealogical and ancestry website. It was held that VAT “was not due on the sale of points that could be used to purchase various services from a genealogical website, until those points were converted into an actual service”. The Court of Session, applying the decision in MacDonald Resorts, upheld the taxpayer’s view that (amongst other things) the nature of the goods / services that will actually be supplied, and the applicable VAT rates, must be clearly identified before there can be a charge to VAT.[22]Avios’ grounds note that the principles determined in MacDonald Resorts were also applied more recently by the Tribunal in Go City Limited v HMRC [2024] UKFTT 745 (TC).[23]Avios’ grounds contend that:(1) points were only purchased by members (in the case of direct purchases), and by issuance partners so that they may be issued to members, with a view to them being converted into rewards (per [23] of MacDonald Resorts);(2) points were not an aim in themselves for members, but a preliminary transaction (per [24] of MacDonald Resorts);(3) the actual services that points were purchased for were the rewards that points can be exchanged for. Those services are not “fully supplied” until the points convert into a reward (per [27] of MacDonald Resorts); and(4) it is only at redemption when points are converted into an actual service, that the connection between the consideration paid for the points and an actual service is established. Only at this point, does a chargeable event occur on which VAT becomes payable (per [31 and 32] of MacDonald Resorts).[24]Avios’ grounds therefore contend that the VAT treatment of the issuance of points to members (for both direct purchases and for payment by issuance partners) was an application of the principles deriving from MacDonald Resorts, as also applied in subsequent case-law. As a result, VAT is not due at the standard rate when points are issued, but instead VAT is due when they are redeemed.[25]Avios considers its view consistent with, and supported by, the contractual arrangements in place with the issuance partners and members (for direct purchases), as well as the economic reality of its operations.[26]Avios contends that if, in any event, the payments by the issuance partners or members (for direct purchases) were for anything other than the issuance of points (which Avios did not accept), then any such element would be de minimis and ancillary to Avios’ principal activity of issuing points to members.[27]Avios contends that the decisions in HMRC v Loyalty Management UK Ltd [2013] STC 1476 and Marriott Rewards LLC v HMRC [2018] STC 1144 offer no authority concerning the subject of Avios’ appeal i.e. whether there was an output VAT liability on payments received by Avios on the issuance of points. Those decisions only concern the recovery of input tax in relation to a different supply to the one under consideration in Avios’ appeal and in a different factual context.

Reliance on Schedule 10B re: points issued after 1 January 2019

[28]Like Virgin, Avios contends that points issued after 1 January 2019 fell to be treated as a multi-purpose voucher pursuant to Schedule 10B. This was on the basis that points satisfied the requirements of Schedule 10B because:-(1) Avios and/or redemption partners were under an obligation to accept points as consideration for the provision of goods/services at redemption;(2) the rewards and redemption partners from whom those rewards could be obtained were stated in or recorded in the terms and conditions and accompanying documentation governing the use of the points;(3) points were transferable by gift; and(4) points could be redeemed for goods/services that are subject to different VAT rates and places of supply.[29]Accordingly, Avios’ position, like Virgin’s, is that pursuant to paragraph 7 of Schedule 10B, the issuance or transfer of a point, as a multi-purpose voucher, is disregarded for VAT purposes and VAT is accounted for on the actual good/service supplied at redemption in accordance with paragraph 8 of Schedule 10B.[30]Avios’ contentions concerning the appropriate VAT accounting at redemption of points are that VAT should be accounted for by the redemption partner; the value on which VAT should be accounted is the amount paid by Virgin to that redemption partner. This ensures that VAT is accounted for by reference to the consideration actually paid, for the actual service that is provided to, and consumed by, the member in return for points (i.e. the reward).[31]In the alternative, and to the extent that any VAT should be accounted for at redemption by Avios rather than by the redemption partner, Avios’ grounds made submissions as to the VAT rate at which particular types of supplies should be charged i.e. standard or zero rated.

Avios’ other appeal grounds

[32]Avios’ arguments as to the relevant assessments being made out of time, were redacted in the version of Avios’ grounds in the hearing bundle.[33]As regards the requirement under s73(1) that HMRC use their “best judgment” when raising an assessment, Avios contends that the assessments were not raised to best judgment and were thus invalid. Avios sought further disclosure of documents from HMRC concerning their decision-making process and reserved the right to amend and/or provide further particulars of its position on this ground.[34]Avios’ contentions regarding legitimate expectation were redacted in the version of Avios’ grounds in the hearing bundle. HMRC’s statement of case in

Avios’ appeal

[35]HMRC’s case was that the economic and commercial reality of Avios’ business was supplying marketing and loyalty services to the issuance partners for consideration: each issuance partner was paying for access to the Avios scheme in order to promote its business and with a view to causing members to spend more money with that issuance partner. The services supplied by Avios to issuance partners were standard rated for VAT.

MacDonald Resorts and multi-purpose vouchers

[36]As regards the appeal ground that there was no output tax on issuance of points, HMRC responded that:(1) MacDonald Resorts, Findmypast, and Go City were not relevant on the facts of this case. The issue of points is not a “preliminary transaction” from the perspective of issuance partners; it is a central part of the way in which Avios makes its supply of marketing and loyalty services to issuance partners.(2) Avios was “put to proof” that points constitute multi-purpose vouchers within the terms of Schedule 10B.(3) Avios’ arguments did not undermine HMRC’s case that during the relevant period Avios made standard-rated supplies of marketing and loyalty services to the issuance partners in return for consideration.[37]If Avios succeeded on the ground that there was no output tax on issuance of points, HMRC contended that it followed that Avios was liable to account for output tax when a member redeemed points (including points resulting from direct purchases): at that time, Avios would have made a supply of goods and/or services to the member, in return for consideration. Avios’ liability to account for output tax at that time would depend on the nature of the particular supply. HMRC maintained that such supplies were standard rated – Avios was “put to proof” in respect of its analysis that some of the supplies were zero-rated.[38]HMRC said that the same analysis applies to the issue of ‘companion vouchers’ as to the issue of points.

Section 73

[39]HMRC contended that the Avios VAT assessments satisfied the requirements of s73(1); in particular, at the time that they were issued it did “appear” to HMRC (including, but not limited to, the assessing officers) that Avios’ VAT returns for the VAT periods covered by the assessments were incorrect. At the time of issuing each of the Assessments the assessing officers had formed a view that Avios had failed to account for output tax on the payments it received from the issuance partners such that its VAT returns were incorrect.[40]HMRC contended that the circumstances in Avios’ case could be distinguished from those in Go City, where the Tribunal held (see [8(1)]) that at the time the relevant assessments “were made, the assessing Officer did not have a view that the [taxpayer’s] returns were incorrect, and neither did any other person within HMRC”. That was not the situation in Avios’ case, HMRC said. As such, Avios’ case was not the type of “unusual situation” addressed in Go City (at [191]).[41]As regards time limits, HMRC said it was common ground that the challenged VAT assessments were issued more than two years after the end of the VAT periods covered by those assessments. As such their validity turned on s73(6)(b). HMRC maintained that each of the challenged VAT assessments was issued within one year of the date on which “evidence of facts, sufficient in the opinion of [HMRC] to justify the making of the [challenged VAT assessments]” came to HMRC’s knowledge within the terms of s73(6)(b).[42]As to the “best judgement” appeal grounds, HMRC contended that Avios had not discharged the burden (on it) of identifying and particularising how HMRC failed to exercise “best judgment” in issuing the Avios VAT assessments. In any event, HMRC said, in issuing the Avios VAT assessments, the assessing officers did satisfy the requirement to exercise “best judgment” in that they issued the assessments:(i) honestly and in good faith;(ii) on the basis of material that was available to them and on which they could base their judgment; and(iii) in a genuine attempt to make a reasoned assessment of the VAT payable. Accordingly, this was not one of the “very exceptional” cases in which an “assessment will be upset because of a failure by [HMRC] to exercise best judgment” (Pegasus Birds, per Carnwath LJ, at [18]).

Three loyalty scheme VAT cases referred to in submissions

[43]I here give summary details, so far as relevant to this decision, of three ‘loyalty scheme’ VAT cases referred to in submissions.

Loyalty Management UK

[44]HMRC v Loyalty Management UK Ltd [2013] STC 784 was a decision of the Supreme Court; based on the headnote in Simons Tax Cases:(1) The taxpayer operated a customer loyalty rewards scheme. ‘Collectors’, ‘sponsors’ and ‘redeemers’ mean approximately the same as members, earn partners and redemption partners in terminology used above to describe Virgin’s ‘loyalty scheme’.(2) The case concerned the recovery of input tax charged by ‘redeemers’ to the taxpayer on the redemption of points for goods or services (as part of the payment by taxpayer to ‘redeemers’ on redemption).(3) It was held by a majority that: (a) The taxpayer provided to ‘collectors’, through the scheme, a contractual right to obtain goods and services from ‘redeemers’ in exchange for points. The counterpart of that right was an obligation on the part of the taxpayer to procure that ‘redeemers’ provided goods and services wholly or partly in exchange for points. The payments made by the taxpayer to ‘redeemers’ constituted the cost of fulfilling that obligation, and were therefore a cost of the taxpayer’s business. The transaction between the redeemers and the taxpayer involved a taxable supply by the former to the latter. (b) If the provision of goods or services by ‘redeemers’ to the ‘collectors’ was treated as a taxable supply (other than to the extent to which money was paid by the collectors), the tax authorities would receive not only VAT on the amount received by the taxpayer from ‘sponsors’ for supplying the right to receive those goods or services, but also VAT on the amount which the taxpayer had to pay to satisfy that right. (c) However, if the service charges were regarded as consideration for the supply of a service to the taxpayer (a service which encompassed the provision of goods and services to ‘collectors’), the tax authorities would still receive VAT from the taxpayer on the difference between the value of the supplies which it made in the course of its business and the value of supplies which it received for the purposes of that business. (d) Therefore, the taxpayer should be authorised to deduct from the VAT for which it was accountable the input VAT charged by the ‘redeemers’, so that it accounted for VAT only on the added value for which it was responsible.[45]At [57], the judgment said that before turning to the case in hand, it was necessary to say something about the principal authorities relied on by the parties; the following 11 paragraphs, under the heading ‘The Redrow line of authority’, did just that, but ended with this note of caution about case precedents in VAT law, at [68]: It is also important to bear in mind that decisions about the application of the VAT system are highly dependent upon the factual situations involved. A small modification of the facts can render the legal solution in one case inapplicable to another. I would therefore hesitate to treat the judgments in Redrow as laying down a universal rule which will necessarily determine the identity of the recipient of the supply in all cases. Given the diversity of commercial operations, it may not be possible to give exhaustive guidance on how to approach the problem correctly in all cases.

Marriott Rewards

[46]Marriott Rewards LLC v HMRC [2018] STC 1144 was a decision of the Upper Tribunal. At [27], under the heading ‘Different types of loyalty schemes have different VAT analyses’, the Upper Tribunal stated: So far as ‘loyalty schemes’ are concerned, the relevant case law reveals that, although they have a common feature, that of rewarding customers, different loyalty schemes have different contractual and commercial arrangements and dynamics. This may, in turn, fundamentally change the VAT analysis of the relevant transactions. We have identified three different ‘models’ (of course there may be others).[47]The three models of loyalty schemes identified by the Upper Tribunal were:(1) simple own customer model - where a trader issues “points” to a customer free of charge and the customer subsequently redeems those points for further goods or services (for no additional consideration)(2) sub-contractor model - where a trader issues points to its own customers but sub-contracts the operation of the redemption of the points to a distinct entity, and(3) separate operator models - loyalty schemes operated by an economic actor who issues points to customers of traders, as part of a business wholly distinct from the traders’ businesses (the loyalty scheme considered in Loyalty Management UK was this third model).[48]The Upper Tribunal commented at [35] that the “separate operator model” (at least in the form present in Loyalty Management UK) was “completely different” from both the simple own customer model and the sub-contractor model. At [36], the Upper Tribunal observed that This (brief) description of loyalty schemes shows that the contractual framework and commercial dynamic of particular loyalty arrangements (in the light of “economic reality”) fundamentally affects the relevant VAT analysis.

Lyko Operations

[49]Case C-436/24 Lyko Operations AB was a decision of the Court of Justice of the EU, concerning the Vouchers Directive. In that case:(a) At [23] and onwards, the Court was considering the requirement in the Vouchers Directive that ‘there is an obligation [for the operator presented with an instrument] to accept it as consideration or part consideration for a supply of goods or services’. The Court said that this condition means that instruments which entail no right for the holder to receive such goods or services but which, for instance, only entitle the holder to a discount upon further purchase of goods or services, cannot be classified as a ‘voucher’.(b) The Court said that, in the present case, the points awarded to the taxpayer’s customers, on the basis of the amount spent on their purchases (from the taxpayer), were to be used in the taxpayer’s “points shop”, in combination with a new purchase of products from the taxpayer, and allowed those customers to obtain products of low value that the taxpayer offered for sale.(c) The Court concluded that the points in question did not create any obligation on the part of the supplier presented with them to accept them as consideration for a supply of goods. The points only enabled holders who decided to make a new purchase from that supplier to obtain, as a bonus, additional goods of low value.

Relevant Law in relation to staying an appeal

[50]Under Rule 5(3)(j) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 the Tribunal has power to order that an appeal is stayed. When exercising such power, the Tribunal must seek to give effect to the overriding objective: dealing with cases fairly and justly.[51]HMRC v RBS Deutschland Holdings GmbH [2007] STC 814 concerned an application by HMRC for a partial stay of the proceedings in relation to the European Union principle of abuse of rights pending delivery of the Court of Justice of its judgments in the cases of Halifax plc v Customs and Excise Comrs (Case C-255/02); BUPA Hospitals Ltd v Customs and Excise Comrs (Case C-419/02); and University of Huddersfield Higher Education Corp v Customs and Excise Comrs (Case C-223/03). The Court of Session at [22] stated that:
“a tribunal or court might sist proceedings against the wish of a party if it considered that a decision in another court would be of material assistance in resolving the issues before the tribunal or court in question and that it was expedient to do so.”
[52]The approach in RBS was adopted by the Tribunal in Coast Telecom Ltd v HMRC [2012] UKFTT 307 (TC) in which Judge Berner observed, at [21], that the "question is not whether the determination of another court might provide assistance, but whether it will provide material assistance.” In Gandalf IT Limited v HMRC [2012] UKFTT 573 (TC), at [7]-[8], Judge Raghavan said this: 7. In relation to the first test of material assistance [counsel for HMRC] drew attention to the particular formulation given in RBS Deutschland. The test was whether the decision in the other court will materially assist in resolving issues. Given the inherent uncertainties in predicting what another court might decide and on what basis I do not understand the court in RBS Deutschland to mean that there must be absolute certainty that the case will assist. Rather, the judgment’s reference to “would be of material assistance…” indicates I think that where there is a high degree of probability that the decision would materially assist in resolving issues, then that would be a reason, subject to expediency considerations, to ordering a stay. 8. Having said that I hesitate to interpret the test set out in RBS Deutschland in the rigid terms that if there is not a high probability then that is the end of the matter given the context in which the test operates is that of a general case management discretion accorded to the Tribunal. The reference to “might” in the extract at paragraph 4 above suggests that it was not thought that a Tribunal must order a stay if the two part test was satisfied. Also, given that even if the material assistance test is established, there will be other factors to throw into the balance, I suggest it is appropriate to consider the level of probability of material assistance and weigh that in the scale in deciding whether or not to order a stay. That means the higher the likelihood of material assistance the stronger the case for ordering a stay subject to taking into account any other relevant factors. I do not think this approach is inconsistent with RBS Deutschland. In particular, it does not fall foul of error of law highlighted there which was that it was wrong of the Tribunal in that matter to insist that the court decision awaited for should be determinative of the issues.[53]Upper Tribunal Judge O'Connor, sitting in the First-tier Tribunal (General Regulatory Chamber) in Ticketmaster UK Ltd v Information Commissioner [2021] UKFTT 83 (GRC) considered RBS and stated at [19] that "the dual considerations of material assistance and expediency, identified in RBS , are simply a rewrapping of the overriding objective … The phraseology of 'material assistance' and 'expediency' logically reflect those matters to which due weight should be attached, but, ultimately, the Tribunal must ensure that the case is dealt with fairly and justly". This view was endorsed by the Tribunal (Judge McNall) in Barclays Services Limited, Barclays Services Corporation v HMRC at [24] – [25]. The FTT in Barclays stated at [43] that “the grant of a stay should be the exception and not the norm and that good reasons must be shown for granting a stay.”

Discussion

[54]Following the approach in RBS Deutschland, the first question is that of “material assistance”.[55]My starting point, based on my summary of Virgin’s and Avios’ appeals above (in the course of which I noted a number of the points of similarity that follow), is(1) that there is very considerable similarity between Virgin’s ‘loyalty scheme’ business and Avios’: both involve the same four types of business entity, in similar business relationships one to the other, namely (a) the operator of the loyalty scheme (Virgin and Avios), which has business relationships with all three of the other participants, namely (b) the loyalty scheme members, who receive points issued by Virgin or Avios, when they purchase goods or services from ‘earn partners’ (to use Virgin’s terminology) (c) the earn partners – the beneficiaries of the “loyalty” engendered by the loyalty scheme - who pay Virgin or Avios on the issuance of points to members, and (d) the redemption partners, who provide goods or services to members on redemption of the points, and who are paid by Virgin or Avios for so doing;(2) that there is very considerable overlap between the legal issues raised in Virgin’s appeals and in Avios’, namely (a) both are concerned with the transactions as between themselves as the ‘loyalty scheme’ operators, and the earn partners; HMRC contend that these are standard rated supplies by Virgin and Avios; Virgin and Avios both say this is incorrect, and there is no supply until the points are redeemed; (b) both rely on the Vouchers Directive, as transposed into UK law in Schedule 10B, and say that the points in their ‘loyalty schemes’ are multi-purpose vouchers for that purpose, with effect from 1 January 2019; (c) both rely on the analysis in MacDonald Resorts, for periods before the entry into force of Schedule 10B;(3) and so, given these similarities, that final determination of one of these appeals (Avios’) would appear, at least at first blush, to be of very considerable assistance in the resolution of the issues in the other (Virgin’s); essentially, this is because there will have been final determination of the (virtually identical) arguments raised based on the Vouchers Directive/Schedule 10B and on MacDonald Resorts, and this will greatly assist in the application of that law to Virgin’s ‘loyalty scheme’, given that it is very much akin to Avios’.[56](For completeness, Virgin’s and Avios’ appeals also have overlapping grounds of appeal in relation to s73 not being satisfied in various ways (time limits, “best judgement”, etc); however, as these depend on the particulars of the enquiries and assessments in the two cases, I am uncertain whether final determination of these particular issues in Avios’ appeal will be of assistance in resolving the parallel issues in Virgin’s.)[57]Virgin clearly does not agree with what I have described as my “starting point”, as Virgin says there are relevant and important differences between Avios’ ‘loyalty scheme’ business and theirs. I now therefore turn to Virgin’s arguments.[58]Virgin preface their arguments by saying that they do not know enough about Avios’ ‘loyalty scheme’ business to identify all the relevant differences (from their own), as they are not a party to the Avios appeal. The counter to this is that HMRC have produced Avios’ grounds of appeal and HMRC’s statement of case in that appeal, which contain a considerable amount of information (albeit redacted in places). These documents are lengthy, detailed and professionally drafted. Because of this, it seems to me they give the Tribunal sufficient information about Avios’ ‘loyalty scheme’ business to make a fair and just determination of the “material assistance” question.[59]Building on this point, there was a suggestion by Virgin that HMRC had “shot too early”, in the sense that they should have waited until evidence was produced in the two sets of appeals, before applying for a stay of one on the basis of relevant similarity with the other. For the same reasons as just given, I do not agree that production of all the evidence in the two sets of appeals is necessary before one can fairly and justly assess the question of “material assistance”.[60]A related argument made by Virgin, based on dicta in the case law I have summarised above, is that because VAT cases are so fact specific, one cannot expect final determination of one VAT case to provide material assistance in resolving issues in another. I do not think the dicta cited are quite as sweeping as this: the remark at [68] of Loyalty Management UK, that “a small modification of the facts can render the legal solution in one case inapplicable to another”, does not mean that the final determination of the first case cannot be of material assistance to the resolution of the second, in that the facts and legal reasoning supporting the “legal solution” in the first case could well assist materially in resolving issues in the second one in the same areas of the law, even if the “legal solution” in that second one is, ultimately, a different one. In other words, one case can materially assist in the resolution of another, where they are considering the same areas of law, even if their facts differ in potentially material respects (such that the strict ratio of the first will not necessarily apply to the second). Furthermore, and addressing dicta in Marriott Rewards, whilst the three models of loyalty scheme identified in that case were very different from each other and had different VAT analyses, the fact remains that the Upper Tribunal was able to identify models of ‘loyalty scheme’ based on the contractual framework and commercial dynamics (in the light of ‘economic reality’) – there is no suggestion that each and every ‘loyalty scheme’ must have its own, unique VAT analysis.[61]In short, there is no rule of thumb, or unbending rule, when it comes to assessing whether final determination of one VAT case will materially assist in the resolution of issues in another VAT case – one must compare the legal issues raised in the two appeals, and the factual matrices on which those legal arguments rest, and decide if they are sufficiently similar.[62]With that in mind, I turn to a contention by Virgin that different point-redemption mechanics as between the two ‘loyalty schemes’ means that final determination of Avios’ appeal will not materially assist in resolving the issues in Virgin’s appeals: Virgin says that in Avios’ scheme, points are redeemed “with Avios” for rewards, whereas, in its scheme, members redeem points “directly” with redemption partners. Virgin says this is an important difference, given the dicta in Lyko Operations about there having to be an obligation to accept points as consideration for the supply of (here) rewards (see [51] above).[63]It seems to me Virgin’s argument here over-states the relevant differences between the two ‘loyalty schemes’, as evidenced in their appeal documents: Avios’ refer to the “conversion” of points into rewards, and to “Avios and/or redemption partners” having an obligation to accept points as consideration for the provision of rewards at redemption; Avios also says that points are exercisable by members against Avios, for rewards provided by redemption partners; Virgin, on the other hand, refers to the redemption partners being obliged to provide rewards “in exchange for” points. In sum, whilst the point emphasised in Lyko Operations does appear to be a relevant and significant one for the resolution of both sets of appeals here, the appeal documentation does not indicate to me that the differences between the two appeals are such that the application of the point in Avios’ appeal will be very distinct from its application in Virgin’s appeals; rather, given the good deal of overlap between the two appeals, both in the factual matrices and in the legal issues raised, it seems to me highly probable that consideration of Lyko Operations in Avios’ appeal will assist very considerably in resolution of parallel issues in Virgin’s.[64]Virgin points to some other differences between their loyalty scheme and Avios’ – that Virgin, the legal entity, also operated an airline business (whereas Avios was distinct from British Airways, and in a different VAT group), and that Avios’ points expired after a period of inactivity, but Virgin’s didn’t – but I am not persuaded that these are relevant differences in the sense of affecting whether final determination of Avios’ appeal would be of material assistance in resolving the issues in Virgin’s.[65]Other differences between the two sets of appeals raised by Virgin included that Avios’ covered the treatment of ‘companion vouchers’ (which was not a feature of Virgin’s ‘loyalty scheme’). This seems to me minor, and dissociable, enough to make no difference to the assistance to be provided by final determination of the Avios appeal on the main, other issues. The other example of “broader” issues in the Avios’ appeal that was raised by Virgin, being public law arguments relating to ‘legitimate expectation’, appears not to be an issue, as HMRC informed us at the hearing that this aspect of Avios’ appeal had been stayed.[66]My conclusion on the question of whether final determination of Avios’ appeal will materially assist in resolving the issues in Virgin’s appeals is, on the basis of the foregoing, that it will; in coming to that conclusion, I have applied the thinking set out in Gandalf in respect of whether one case “will” materially assist in resolution of another; the clarification and articulation of the common areas of law between the two sets of appeals (the Vouchers Directive, Schedule 10B, MacDonald Resorts), that will be afforded by a final determination of Avios’ appeal, will be likely, to a high degree of probability, to assist very considerably in resolving Virgin’s appeals (even if the strict ratio of the determination of Avios’ appeal may, or may not, be determinative of Virgin’s).[67]I add, for completeness, that I do not think that the assistance rendered by a final determination of Avios’ appeal, is materially compromised because there are some distinct issues (the ones generally relating to s73) where it is uncertain if such assistance will be rendered: these “other” issues are, in my view, sufficiently distinct, and secondary, to the issues where there is very considerable similarity, that they do not have this effect.[68]Turning now to the “expediency” question in the RBS Deutschland approach, the arguments that a stay would be “inexpedient” are(1) that it would delay the holding of the Tribunal hearing of Virgin’s appeals and so the evaluation of the evidence – and that the quality of the evidence may deteriorate during the period of that delay e.g. by witnesses no longer being employed by Virgin or otherwise becoming unavailable, and by witnesses’ memories fading with the passage of time; and(2) that it would delay the final determination of Virgin’s appeals (and so, if the appeals were ultimately to be allowed, Virgin’s recovery of £23.5 million).[69]This is a balancing exercise, in which the potential costs to fairness and justice, as just summarised, are to be weighed against the benefits thereto, in the form of the material assistance that a final determination of the Avios appeals would provide. In that regard, I discount the weight to be assigned to the negative factors above, as (and taking them in turn)(1) this can be mitigated against by taking written evidence as early as possible; and identifying and preserving relevant documents;(2) this presupposes that, absent a stay, the hearing of Virgin’s appeal in the Tribunal would be its final determination; whereas, given that the Avios appeal is going to be litigated at about the same time, whichever party is the loser in the Tribunal’s determination of Virgin’s appeals, is going to be alive to the outcome of Avios’ appeal and its possible onward appeal, when deciding whether to pursue an appeal in Virgin’s case; in other words, given their similarities (as I have found them), each of these appeals is likely to be influenced by the outcome in the other, pending a final determination.[70]Given this, and the very considerable assistance which, in my view, a final determination of the Avios appeal would afford to the central issues in Virgin’s appeals, the balance of what is fair and just favours granting this stay.[71]The directions below reflect this, as well as the parties’ joint request that Virgin’s appeals be consolidated into a single appeal.

Directions

[72]IT IS DIRECTED that(1) these two appeals (TC/2025/01899 and 02126) be consolidated into a single appeal under reference TC/2025/01899; and(2) the proceedings are stayed behind the case of Avios Group (AGL) Limited(TC/2025/00927) and all directions are stayed for 60 days after that appeal has been finally determined.

Right to apply for permission to appeal

[73]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 12 June 2026