The Upper Tribunal has held that the cost of hotel accommodation provided by British Airways to flight crew between two legs of a “back-to-back” transatlantic rotation at Heathrow was deductible as a travel expense under ITEPA 2003 s.337: HMRC v British Airways PLC [2026] UKUT 366. The UT rejected HMRC’s arguments that the expenditure was not “in the performance” of the duties and simply to put the cabin crew in a position to perform their core or operational duties.
BA provided cabin crew operating back-to-back (B2B) transatlantic rotations through London Heathrow with hotel accommodation. HMRC took the view that this benefit was earning of the employment and a taxable benefit provided by BA subject to NICs and income tax. BA argued that the expense of the accommodation was a deductible expense under the provisions of ITEPA 2003 ss.336 to 338. In particular, s.337 provides that “A deduction from earning is allowed for travel expenses if (a) the employee is obliged to incur and pay them as holder of the employment and (b) the expenses are necessarily incurred on travelling in the performance of the duties of employment”.
The FTT held in favour of BA that the duties of employment of the cabin crew extended throughout a rotation, such that the crew were performing duties throughout the period, notwithstanding the prescribed rest periods. On that basis, the FTT held that the cost of the accommodation was deductible under s.337 because the crew were travelling in...
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