TC09595 - [2025] UKFTT 00894 (TC)

Fecha: 12-Jun-2025

Introduction

Introduction

Between 2004 and 2020 the Appellant, Airline Placement Limited (“APL”) procured airline pilot training for trainee pilots (“cadets”) and placed qualified pilots with commercial airlines (“Sponsor Airlines”) in return for a “placement fee” equal to the cost of the cadets’ training. As described in more detail below, the cadets were required to deposit a “security bond”, equal to the cost of their training, with APL. On completion of their training and placement with a Sponsor Airline, APL would transfer the bond to the Sponsor Airline. APL accounted for VAT on the placement fees paid to it by the Sponsor Airlines but did not account for VAT on the security bonds deposited by cadets.

APL contends that the bonds deposited by cadets was security for the costs it incurred to ensure that the cadets would undertake and complete the training course and therefore not subject to VAT.

The Respondents (“HMRC”), by letter of 26 January 2021 (the “Decision Letter”), issued a decision stating that the security bond was “consideration for the supply of training” that the cadet “is due to receive or has received” and is either a standard rated supply and subject to VAT or an abusive arrangement under the principles set out in Halifax Plc v Customs and Excise Commissioners (C-255/02) with the same result. On 16 August 2021, HMRC issued APL with an assessment, under s 73 Value Added Tax Act 1994 (“VATA”), in the sum of £10,717,426 for its VAT periods from 03/17 to 12/20 inclusive (the “Relevant Period”). HMRC’s decision and assessment were upheld on 21 April 2022 following a review.

On 20 May 2022 APL appealed to the Tribunal against HMRC’s decision and assessment. It contends that on a proper contractual analysis the economic reality of the arrangements was that APL made taxable supplies of trained cadets to the Sponsor Airlines rather than taxable supplies of training to the cadets. Alternatively, APL contends that:

(1)

the assessment should be adjusted to give credit for the output tax already accounted for by APL on the placement fees paid by Sponsor Airlines;

(2)

the assessment should be reduced so as to exclude that part of the training which took place outside the UK; and/or

(3)

the parties reached a binding agreement under s 85 VATA that the assessment be reduced so as to exclude the proportion of the payments – computed pursuant to specified methodology – which related to supplies of training outside the UK.

Nicola Shaw KC appeared on behalf of APL. HMRC was represented by Howard Watkinson. We have found their submissions, both written and oral, most helpful. Although we have not referred to every submission or argument advanced on behalf of the parties or to all of the materials or authorities to which we were referred, we have taken all of them into account.