What happened
British Airways' parent IAG is challenging a UK tax assessment that 20% VAT should apply when Avios are issued, not when they are spent. The group has €638 million (US$710 million) tied up in the dispute, including €516 million of historical net payments recorded as an asset it expects back if it wins, and €122 million as a contingent asset.
IAG had accounted for VAT on redemptions, most of them flights at a zero rate. The tax authority treats IAG Loyalty as being paid to run a program, so issuing Avios would attract 20% VAT even if the member later books a zero-rated flight. IAG says that treatment followed an earlier ruling and existing case law, and it is challenging a retrospective change. A tribunal hearing is expected later in 2026, with a decision in 2027.
If issuing Avios costs more, banks may buy fewer points or cut bonuses, and IAG may reprice awards. It may absorb costs it cannot recover from partners, then rework those deals or the value of the points. Nothing to do yet, but watch the tribunal decision in 2027 and any later changes to Avios earning or award pricing.
- Announced
- Nov 6, 2026
- Numbers
- €638 million: total amount tied up in the Avios VAT dispute
- 20%: VAT the government wants charged when Avios are issued
- US$710 million: dollar equivalent of the €638 million dispute
- €516 million: historical VAT payments recorded as a recoverable asset
- €122 million: later payments disclosed as a contingent asset
- Takeaway
- There is nothing to book or register for; watch the 2026–2027 tribunal outcome and any later changes to Avios earning or award pricing.