- The UK First-tier Tribunal ruled Tapi Carpets Ltd. did not owe £13.5 million in VAT on floor-fitting services by independent fitters.
- The key issue was whether the fitters supplied services directly to customers or through Tapi as a subcontractor/intermediary.
- Although customers paid Tapi a fee to arrange fitting, they paid the fitters directly on installation day.
- HMRC argued Tapi’s control over pricing, fitter assignment, and complaints meant the services were taxable through Tapi.
- The tribunal sided with Tapi, finding the fitters contracted directly with customers, so Tapi was not supplying the fitting services and was not liable for the VAT.
Source: globalvatcompliance.com
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UK FTT confirms agency treatment for independent carpet fitters
Summary
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The First-tier Tribunal allowed Tapi Carpets Limited’s appeal against VAT assessments totalling approximately £13.56 million. It held that independent fitters supplied fitting services directly to customers, while Tapi Carpets Limited supplied a separate, taxable arrangement service as the customer’s disclosed agent. [vlex.co.uk]
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The contractual structure was supported by the commercial facts. Customers paid fitters directly, fitters were free to accept work and could amend their charges, and Tapi Carpets Limited neither paid the fitters nor assumed responsibility for collecting unpaid fitting fees. [vlex.co.uk]
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The decision reinforces the importance of clear contracts, but customer communications, operational practices and payment flows should also align with those contracts. Businesses using independent installers or service providers should review the entire customer journey, particularly references that could imply the providers are “our” staff or subcontractors.
Article
The UK First-tier Tribunal has allowed the taxpayer’s appeal in Tapi Carpets Limited v HMRC, neutral citation [2026] UKFTT 1128 (TC), concerning whether flooring installation services were supplied by the retailer as principal or by independent fitters directly to customers. The judgment was dated 5 August 2026. HMRC had assessed VAT of £13,555,315 for periods between June 2019 and December 2023. [vlex.co.uk]
Customers purchasing flooring could either arrange installation themselves or pay Tapi Carpets Limited a separate fee to arrange a fitter from an approved pool. The customer then paid the fitting fee directly to the fitter when the work was performed. Tapi Carpets Limited accounted for VAT on its arrangement fee, but not on the fitting fee.
HMRC argued that the fitters were effectively subcontractors supplying their services to Tapi Carpets Limited, which then made an onward taxable supply of fitting to the customer. The
Tribunal rejected that analysis. It concluded that Tapi Carpets Limited acted as a disclosed agent for the customer when arranging the fitter, while the fitter contracted with and supplied the installation service directly to that customer. [vlex.co.uk]
Several operational features supported the contractual position. Fitters were independent, were not required to accept work and were not guaranteed assignments. They could adjust the fitting price to reflect additional or more complex work. Customers paid them directly, and any collection risk remained with the fitter. The Tribunal found nothing artificial, uncommercial or inconsistent with economic reality in the arrangements.
The decision is commercially significant because many fitters operated below the VAT registration threshold. Accordingly, treating the retailer as principal would have brought fitting fees within the VAT net even where the individual fitter was not required to register.
The ruling follows the taxpayer’s success in United Carpets (Franchisor) Ltd v HMRC, [2025] UKFTT 895 (TC), another case involving flooring supplied by a retailer and installation carried out by independent fitters. That earlier Tribunal also focused on contractual documentation and the economic reality of the parties’ relationships. [taxbar.com]
Businesses using independent installers, gig-economy providers or other third-party service professionals should not view either decision as establishing an automatic exemption from principal status. Contracts should clearly identify the parties, agency capacity, payment obligations, performance responsibility and complaint arrangements. Websites, quotations, order confirmations, invoices and staff scripts should be reviewed for consistency. References such as “our fitters” did not determine the result here, but inconsistent communications may still create avoidable challenge and evidential risk.
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Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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