Hello,
Was a Heathrow hotel stay between long-haul flights a taxable benefit for British Airways cabin crew, given that Heathrow was their home base? In HMRC v British Airways Plc (BA), around £5.8m of tax and National Insurance Contributions (NICs) turned on that question.
Between 2016 and 2020, BA crew on back-to-back transatlantic rotations were required to stay at a designated hotel near Heathrow between trips. HMRC accepted that hotel stays overseas were deductible travel expenses, but argued that accommodation at the crew's home base was a taxable benefit.
The Upper Tribunal (UT) disagreed. Like the First Tier Tribunal (FTT), it found that staying at the hotel was part of the crew's employment duties, not merely preparation for them. Although it rejected part of the FTT's reasoning on travel, the UT concluded that the crew's journey only ended once the full rotation was complete, and that ‘home base’ was a regulatory concept, not home. The costs therefore qualified as deductible travel expenses, and no Income Tax or Class 1A NICs liability arose. Our case summary below examines the factors behind the decision. It is useful reading for anyone advising employers whose staff must stay away mid-assignment.
There’s a VAT theme in our other case summaries this week. In Chandra Bahadur KC v HMRC, the FTT concluded that a takeaway owner should have registered for VAT from the day he took over the business. Although the company that previously ran it had never registered, its turnover meant it should have done so, and that history passed to the new owner. This serves up a timely reminder that when a client takes over a business, the previous owner's turnover matters as much as its registration status.
In Its Plant-Tech Limited v HMRC, a company genuinely believed its staff had been transferred to external payroll providers, but there was limited documentary evidence of the transfer, and little changed in practice. The FTT held that the providers supplied a payroll processing service, not labour, and upheld HMRC's denial of around £569,000 of input VAT. A key message here is to properly understand the economic reality of arrangements, and ensure that is supported by relevant documentation.
Finally, our new Inheritance Tax guide covers transfers of value by close companies. These rules are easily overlooked when advising owner-managed businesses, and the guide explains when they apply and what to look out for.
More news, cases and updates below.
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Autumn Budget 2026: Analysis, Client Newsletter & Webinar
This year's Budget on 28 October will be significant: it will be the first delivered by Chancellor John Healey, coming just months into Andy Burnham's tenure as Prime Minister.
With a new leadership team setting fiscal policy for the first time, this Budget will be a key signal of the government's economic direction for the coming years, making it more important than ever for you and your clients to stay ahead of the field.
Leave the analysis to us and save serious time; our team of qualified accountants and tax advisers will read hundreds of pages of announcements, policy papers and consultations to bring you succinct summaries highlighting the changes that matter to you and your clients. This will ensure that your whole team is up to date, aware of the Budget impacts, and able to communicate the changes to your clients effectively.
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Quick News
One-to-many letters: Tracker
HMRC's latest one-to-many 'nudge' letters include a letter targeted at individuals that HMRC believe may not have declared all income from medical consultancy fees, and an email or text communication to those who may be impacted by the Foreign Income and Gains (FIG) regime.
Tax Cases (subscription content)
HMRC loses appeal on BA cabin crew accommodation
In HMRC v British Airways Plc [2026] UKUT 00366, the Upper Tribunal found that hotel accommodation provided by British Airways Plc to cabin crew during back-to-back transatlantic rotations qualified for relief as deductible travel expenses under s.337 ITEPA 2003. The dispute centred on whether accommodation provided near Heathrow between flights was a taxable benefit or a deductible employment expense.
FTT upholds takeaway VAT registration after TOGC
In Chandra Bahadur KC v HMRC [2026] TC10014, the First Tier Tribunal (FTT) held that HMRC had correctly registered a takeaway business for VAT. It had been acquired as a going concern, so the value of taxable supplies for the year before the transfer could be taken into account in testing whether the VAT registration threshold had been exceeded.
Input tax deduction on payroll arrangements denied
In Its Plant-Tech Limited v HMRC [2026] TC10013, the First Tier Tribunal (FTT) found that a genuine belief that employees had been transferred to third-party entities was no substitute for evidence. Without proof of that transfer, input tax on invoices for wages and employers' National Insurance Contributions was not deductible.
Liquid collagen anti-ageing products not 'food' for VAT purposes
In Minerva Research Labs Limited v HMRC [2026] TC10017, the First Tier Tribunal (FTT) found that anti-ageing liquid collagen products for human consumption were not 'food' for VAT purposes and should not be accounted for as a zero-rated product.
Editor's Choice
This week's Editor's Choice was selected by Andie Ross. You can meet our team of editors and writers here: Meet the team.
Mandatory payrolling of benefits from 2027: Briefing
The mandatory payrolling of Benefits In Kind and taxable employment expenses will come into force on 6 April 2027. What is mandatory payrolling? Will there be any exceptions? How will it work? Do I need to register? What values should I use?
Globally mobile employees: PAYE reporting obligations toolkit
This toolkit helps determine what your PAYE reporting requirements are when sending an employee to work overseas or having an employee come to work in the UK from overseas.
Non-resident tax toolkit
This toolkit covers the key UK tax issues for non-UK resident individuals holding UK assets and property and working in the UK.
Guides & Updates
New This Week
IHT: Transfers by close companies
What Inheritance Tax (IHT) provisions apply to transfers made by close companies? How is IHT calculated on these transfers? What impact do alterations to share capital or rights have? Are there any exclusions?
Self-employed
Allowances: Trading and Property
What are the trading and property allowances? Who can claim them? What are the restrictions?
Partnerships
Partnerships: Losses
What loss reliefs are available to partners and what restrictions are there? How to calculate a partner's capital contribution? What are the anti-avoidance rules?
Directors & Companies
Purchase (repurchase) of Own Shares
How can a company repurchase its share capital? What are the Companies Act requirements? What are the tax consequences for the company and shareholders?
Land Remediation Relief (LRR)
What is Land Remediation Relief (LRR)? Who can claim LRR and what are the conditions? What happens if LRR creates or enhances a loss?
Employers
Removal and relocation expenses
How much may an employer reimburse for removal and relocation expenses? What are the conditions for tax relief?
Private Client & Estate Planning
Trusts & Estates: Ten-year charge reporting requirements
What is the ten-year charge (or principal or periodic charge) and when does it apply?
Divorce & Separation: Toolkit
A summary of the tax implications which can arise on divorce and separation.
Overseas & Residence
Overseas Workday Relief (OWR)
What is Overseas Workday Relief (OWR)? When does it apply? What are the recent changes to OWR?
Penalties & Compliance
Penalties: Deliberate Behaviour
What penalties apply when a taxpayer has acted deliberately, resulting in a potential loss of tax revenue? What is classed as deliberate behaviour? What is the relevant case law for deliberate behaviour?
VAT
Post-deregistration VAT recovery
When can VAT be recovered following deregistration? How is such VAT recovered?
Continuing Professional Development (CPD)
Recent and upcoming webinars include:
- Budget Update - October 2026
- Corporation Tax Update and Refresher
- Practice Insight - October 2026 (free)
- Monthly Tax Update - October 2026
- Practice Insight - September 2026 (free)
- Monthly Tax Update - September 2026
- Practice Insight - July 2026 (free)
- Capital Gains Tax Planning Strategies to Maximise Net Proceeds (free)
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Virtual Tax Partner© Support
Have a tax query? Need a second opinion? Open a ticket and ask a question. A team of tax experts with a wide range of expertise, covering direct and indirect tax, as well as accounting, reorganisations and much more.
Missed the Last Tax Update?
Ross Martin Tax: SME Tax Update 1 October 2026
- Welsh Budget 2027-28 date announced
- One-to-many letters: Tracker
- Beneficial owner of property liable for CGT
- No green light for 'Hulk' R&D relief claim
- Addison Lee founder domiciled in England
- Winter Fuel Payment recovery
- Globally mobile employees: Short-Term Business Visitors
- Pre-trading expenses (companies)
- CIS: Contractors and Subcontractors
- IHT: Normal Expenditure Out of Income (gifts)
- Partial exemption & input VAT ...More
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