VAT Liability of Services

In the case of Wiltonpark Ltd and others v HMRC, the Appellant owned and operated table and lap dancing clubs in the UK in which the dancers were self-employed and received payment directly from the customers either in the form of cash or vouchers. Wiltonpark Ltd sold vouchers to customers which were encashed at the end of evening, at which point the dancers paid a commission of 20% of the value of the voucher to the club owner.

 

Wiltonpark Ltd argued that the commission was consideration for the business operating the voucher scheme and was therefore exempt from VAT under item 1 of Group 5 of the Schedule 9 to the VAT Act 1994 however HMRC were of the view that additional services to the operation of the voucher scheme were supplied by the Appellant and VAT was due at the standard-rate of VAT.

 

The case was referred to the Upper Tribunal who concluded that, the commission charged by the Appellant was not simply payment for the business operating the voucher scheme but related to a composite supply that included the provision of the clubs facilities enabling the dancers to supply their services to customers to a wider market that would not otherwise be available to them. As such, the supply was not an exempt supply of encashment of vouchers, and Wiltonpark Ltd.’s appeal was dismissed.

 

If you or your client operate voucher schemes such as the Appellant in this case, please call our free VAT helpline to clarify that VAT is being accounted for correctly on all payments relating to the scheme.

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