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IAG’s €638 million Avios VAT dispute: Will Avios Become More Expensive?
IAG (the parent company of British Airways) is challenging how VAT applies to Avios. The outcome could have some unwelcome consequences for collectors. If HMRC wins, we could eventually see fewer Avios earned, less generous bonuses and potentially more expensive redemptions. IAG provided more detail in its Q3 results, which we covered on Friday.
In October 2024, HMRC issued a decision stating that IAG Loyalty must pay VAT at the standard 20% rate on Avios issued from March 2018 onwards.
HMRC argues that IAG Loyalty provides the services of developing, operating and maintaining the loyalty programme, so 20% VAT should apply regardless of how the Avios are used.
IAG disagrees, arguing that VAT should depend on what Avios are eventually redeemed for. Since most redemptions are flights, which are generally zero-rated for VAT, IAG has historically accounted for VAT on that basis.
IAG has paid €516 million to HMRC without admitting liability, with a further €122 million relating to VAT payments made since HMRC’s October 2024 decision (recorded separately in its accounts). Together, the amounts total €638 million, and the case is now heading to the tax tribunal.
The first-tier tribunal is scheduled for Q4 2026, with a decision anticipated in 2027.
Although IAG’s board doesn’t expect an adverse outcome, there’s clearly a lot at stake.
For Avios collectors, the concern is where that additional cost might eventually end up. If IAG loses, it could pass some of the cost on to its commercial partners, who may then pass it on to customers through lower earning rates, smaller welcome bonuses or fewer promotions. Some partners could even decide that offering Avios is no longer worthwhile.
There’s also the possibility of changes to redemption pricing or cash charges, although none of this has been announced.
And let’s face it, Avios collectors have already had their fair share of changes recently, particularly with the overhaul of the British Airways Club and the changes to earning and retaining status. The last thing members need is another reason to question whether they’re getting good value from their loyalty.
Of course, it’s important not to get ahead of ourselves. IAG is confident in its position, and even an unfavourable ruling wouldn’t necessarily mean an immediate change for members.
Our hope is that whatever happens, the cost doesn’t end up being passed on to the people who have spent years collecting Avios. Loyalty programmes only work when members feel they’re getting something worthwhile in return.
We’ll be following the case closely and will report on any developments.
Read IAG’s full Q3 2026 results here
AMEX Marriott Cashback Offer – Up to 20% Back
AMEX has launched a Marriott offer on selected cards. You can now receive £100 cashback when you spend £500 or more at participating hotels in Europe and the Middle East until 31st December 2026.
If you have a Marriott stay coming up, or you’re planning a trip, check that the offer is showing on your AMEX card and any supplementary cards you hold. It seems to be showing on a range of Platinum, Gold, BA, and business cards. Make sure you save the promotion to your card before spending; otherwise, you won’t qualify for cashback.
There’s a long list of participating hotels in 19 countries, including the UK, France, Spain, Italy and Greece, but make sure your chosen hotel is on the list before booking. View the full list here. You must also pay at the hotel.
You can spread the £500 spend across multiple transactions, rather than all at once. If two cards have the offer saved, you could potentially split a £1,000 hotel bill and receive £200 cashback.
If you hold a Marriott AMEX, there’s a more lucrative targeted promotion running of £70 back on £200 spend until 31st December. You can also combine the offer with Marriott’s latest global promotion of 1,500 bonus points on every qualifying paid stay of 2+ nights (plus an extra 3,000 points at participating resorts), as long as you remember to register before 13th November and complete your stay before 22nd November 2026.
Last Chance to Win a £500 Hilton Gift Card – Enter by Sunday!
Less than a week remains to win a £500 Hilton Gift Card in our latest TLFL giveaway. Entries close at 11:59 PM on Sunday 15th November, so make sure you enter before it’s too late!
You can use the Gift Card at participating Hilton hotels across the UK, Ireland and Europe, including brands such as Waldorf Astoria, Conrad, Hilton and DoubleTree. Full list here. £500 could go a long way for a weekend away, city break or £500 off a special stay. The card is valid for five years and can be used for multiple hotel stays.
You can earn entries by subscribing to our newsletter, following us on Instagram, joining our Facebook group or referring a friend who enters the competition using your referral link. Each action counts as a separate entry, so complete all four for the maximum of four entries. Complete the actions using the competition widget here.
The competition is open to UK residents aged 18 and over, and full terms and conditions apply. We’ll randomly select one winner via Gleam after the competition closes. Entry is free and only takes a couple of minutes.
We’ll be running regular giveaways each month, so keep an eye on your TLFL emails for more chances to win.
If you have any ideas for future prizes you’d like to see, let us know in the comments below.
Good luck!
