TC09595 - [2025] UKFTT 00894 (TC)

Following receipt of the Decision Letter, APL commenced Judicial Review proceedings on the grounds that it, and the subsequent assessment, were a breach of its legitimate expectation that the VAT treatment set out in the Clearance Letter would apply for the duration of the Relevant Period and that it would not be withdrawn without fair notice and with retrospective effect. APL’s alternative position was that even if there was no legitimate expectation, it was nevertheless unreasonable and/or an abuse of power for HMRC to withdraw the Clearance Letter without fair notice and with retrospective effect.

HMRC contended that, because of the absence of a full and frank disclosure in APL’s request for non-statutory clearance, no legitimate expectation could arise on the basis of the Clearance Letter. In particular, HMRC relied on APL’s failure to disclose that during their employment with a Sponsor Airline, a cadet might receive a reduced salary to take account of the fact that the airline had paid a placement fee for the provision of the cadet.

The judicial review was heard by Constable J on 10 and 11 May 2023. The Judicial Review Judgement was handed down on 19 May 2023.

Having been provided with the easyJet Loan Agreement (see paragraph 49 of the Appendix) and easyJet Pilots Pay and Benefits schedule, dated 1 October 2015 (see paragraph 22, above) showing that a Senior First Officer “without the Loan Agreement” would receive a higher salary than a Senior First Officer with a Loan Agreement, the difference being the amount of the bond, Constable J observed, at [55]:

“… It is abundantly clear, therefore, that in relation to easyJet, the cadet in fact pays for their own training through a salary sacrifice and no part of the bond is, in reality, repaid to it. …

Constable J also referred to statements included in APL’s request for non-statutory clearance, the STP programme brochure for potential cadets and website, noting, at [57], that these gave:

“… the clear and unambiguous impression to the reader of the material that the scheme was such that the cadet ultimately has its bond repaid to it in full, in a real rather than illusory way, and that the cadet was not therefore the one who (in reality) paid for their own training”

He went on to observe, at [59]:

“It is in these circumstances entirely understandable that [the Finance Director of CTC whose comments we refer to at paragraph 63, above)] had formed the impression that the fact of the salary sacrifice arrangement, ‘might indicate that the Cadet is paying for the training they received from CTC by way of taking a reduced salary once employed and therefore in effect the Cadet is paying for their training’. This comment hits the nail on the head – although the word ‘might’ is something of an understatement.”

Having found, at [60] of the Judicial Review Judgement, that APL’s non-statutory review request and supporting information was “inaccurate and misleading” and, at [76], it was “materially so”, Constable J dismissed APL’s claim for judicial review. However, it is accepted, quite rightly, that the Judicial Review Judgment is not binding on this Tribunal although, as Mr Watkinson submitted, it is nevertheless “very persuasive”.