LONDON, Nov. 7, 2026 — IAG, the parent of British Airways, has €638 million (about US$710 million) tied up in a dispute with the UK tax authority over whether VAT applies when Avios points are issued. The case goes back to March 2018.
The dispute
- The tax authority says IAG Loyalty is paid to develop, run and maintain the Avios scheme, so issuing Avios should carry 20% VAT, whatever members later redeem them for.
- IAG has historically accounted for VAT when points are redeemed, mostly on flights at a zero rate.
- Of the total, €516 million in past payments (net of input-tax recoveries) is booked as an asset IAG expects to recover if it wins. A further €122 million is disclosed as a contingent asset.
- IAG expects a tax tribunal hearing during the rest of 2026 and a decision in 2027 (dates TBA). It is challenging the assessment and whether the change can be applied retrospectively.
- IAG disclosed the figures with its third-quarter results on Nov. 6. View from the Wing argues a loss could mean fewer Avios per pound spent, smaller bonuses or pricier redemptions. That is commentary; IAG has announced no changes to Avios.
What it means for non-revs
Staff travel is not affected. The case matters to airline employees and families who earn and redeem Avios.
Sources
- View from the Wing: British Airways $710 Million Tax Fight Could Leave Members With Less Valuable Points
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