Lap dancing VAT

The taxpayer companies ran lap dancing clubs. The dancers were self-employed and paid a fee to gain entry.

Customers could pay in cash or use vouchers that could be bought with a debit card or credit card. The clubs charged the dancers a 20% commission on redemption of the vouchers.

The taxpayers argued they made an exempt supply of handling money within VATA 1994 sch 9 group 5 item 1.

HMRC disagreed saying the clubs were providing the dancers with a taxable supply of performance facilities.

The First-tier Tribunal dismissed the taxpayers’ appeal.

The matter moved to the Upper Tribunal which first considered whether the taxpayers’ vouchers were “security for money” within the meaning of item 1.

The judge decided they were given by the customers to the dancers as a security for money because the club was legally obliged to redeem them when...