Secret attraction to VAT

Customers of the taxpayers a number of lap dancing clubs could pay women to sit and chat or perform a private dance.

Visitors paid with cash or Secrets money which comprised face-value vouchers that were bought with a debit or credit card. They were subject to a 20% commission added to the face value. Dancers redeemed the vouchers less the 20% charge.

It was agreed by HMRC that the commission charged to customers was consideration for a taxable supply under VATA 1994 sch 10 para 2 and para 4 while the 20% taken from the dancers was consideration for a supply by the company.

The issue of the case concerned the nature of the supply.

The taxpayers claimed they were making an exempt supply of handling money (sch 9 group 5 item 1) but the Revenue argued the vouchers were not security for money:...