Secret money

VAT due on commission paid on redemption of vouchers

The taxpayers operated table and lap dancing clubs in London. The dancers were self-employed and customers paid them direct in cash or with vouchers that could be bought with a debit or credit card. The clubs charged the dancers a 20% commission on redemption of the vouchers.

The taxpayers said the dancers paid the commission to use the voucher scheme which made it an exempt supply money within VATA 1994 Sch 9 group 5 item 1. HMRC argued that the clubs provided more services than just the voucher scheme so VAT was due at the standard rate.

The First-tier Tribunal and Upper Tribunal (Tax and Chancery Chamber) dismissed the taxpayers’ appeals.

Before the Court of Appeal the taxpayers accepted that the service provided in return for the commission was more than encashment of the vouchers and included giving...