In Tapi Carpets Ltd v HMRC [2026] UKFTT 1128 (TC), Tapi sold flooring and offered customers the option of either arranging installation themselves or paying a separate fee for Tapi to source a fitter from its approved network. Customers paid the fitter directly for the installation work, while Tapi charged VAT on its separate fitting arrangement fee.
HMRC assessed £13.6m of VAT, arguing that Tapi was the principal supplier of the fitting service and that the fitters were effectively supplying Tapi under a subcontracting arrangement. HMRC relied on factors including Tapi setting quoted fitting prices, selecting fitters, coordinating appointments, monitoring standards, handling complaints, providing a ten-year fitting guarantee and describing fitting as part of ‘our’ service in customer communications.
The tribunal rejected HMRC’s position. It held that the starting point was the contractual documentation and that those arrangements reflected the economic and commercial reality. Customers paid Tapi to arrange access to a suitable fitter, but the fitter remained responsible for the fitting work itself, could negotiate pricing where circumstances differed from expectations, contracted directly with the customer and bore the risk of non-payment. The tribunal considered that Tapi’s ongoing involvement, quality monitoring and guarantee obligations were consistent with protecting its brand and providing the arrangement service, rather than supplying the fitting service itself. The assessments were therefore cancelled.
Key takeaway/recommendation: Businesses using agents, subcontractors or independent service providers should review whether their contracts, payment arrangements and day-to-day operations all support the intended VAT treatment. The tribunal was persuaded because Tapi’s documentation and the way the arrangement operated in practice were broadly aligned. Where a business intends to act only as an intermediary, it should ensure that customer contracts, invoices, payment flows and communications consistently reflect that position.
In Tapi Carpets Ltd v HMRC [2026] UKFTT 1128 (TC), Tapi sold flooring and offered customers the option of either arranging installation themselves or paying a separate fee for Tapi to source a fitter from its approved network. Customers paid the fitter directly for the installation work, while Tapi charged VAT on its separate fitting arrangement fee.
HMRC assessed £13.6m of VAT, arguing that Tapi was the principal supplier of the fitting service and that the fitters were effectively supplying Tapi under a subcontracting arrangement. HMRC relied on factors including Tapi setting quoted fitting prices, selecting fitters, coordinating appointments, monitoring standards, handling complaints, providing a ten-year fitting guarantee and describing fitting as part of ‘our’ service in customer communications.
The tribunal rejected HMRC’s position. It held that the starting point was the contractual documentation and that those arrangements reflected the economic and commercial reality. Customers paid Tapi to arrange access to a suitable fitter, but the fitter remained responsible for the fitting work itself, could negotiate pricing where circumstances differed from expectations, contracted directly with the customer and bore the risk of non-payment. The tribunal considered that Tapi’s ongoing involvement, quality monitoring and guarantee obligations were consistent with protecting its brand and providing the arrangement service, rather than supplying the fitting service itself. The assessments were therefore cancelled.
Key takeaway/recommendation: Businesses using agents, subcontractors or independent service providers should review whether their contracts, payment arrangements and day-to-day operations all support the intended VAT treatment. The tribunal was persuaded because Tapi’s documentation and the way the arrangement operated in practice were broadly aligned. Where a business intends to act only as an intermediary, it should ensure that customer contracts, invoices, payment flows and communications consistently reflect that position.
