Tapi Carpets Wins £13.5 Million VAT Case on Disclosed Agency for Flooring Fitters

Summary

HMRC will not appeal the Tapi Carpets decision. The First-tier Tribunal rejected assessments exceeding £13.5 million and found that independent fitters supplied installation services directly to customers. Tapi supplied a separate fitting-arrangement service and acted as the customer’s disclosed agent, rather than buying and reselling the fitting service as principal.

Customers paid the fitting fee directly to the fitter after installation, while Tapi charged a separate arrangement fee and accounted for VAT on that fee. Contractual documents and economic reality supported direct fitter-to-customer supplies. Tapi’s vetting, estimated prices, service standards, guarantee and complaint involvement did not convert fitters into subcontractors.

The decision confirms that contracts are the starting point, but conduct must remain consistent with them. Retailers arranging third-party services should document agency, disclose the service provider, separate arrangement and service fees, assign responsibilities clearly and ensure customer communications, guarantees, payment flows, invoices and complaint handling do not contradict the.

Extended article

HMRC will not appeal the First-tier Tribunal judgment in Tapi Carpets Ltd, ending a dispute over more than £13.5 million of output VAT. The issue was whether Tapi sold flooring fitting services as principal or merely arranged services supplied by independent fitters directly to customers. Customers purchasing floor coverings could arrange installation themselves or pay Tapi a separate fee to arrange an independent fitter from Tapi’s vetted pool. After installation, the customer generally paid the fitting fee directly to the fitter. Tapi accounted for VAT on its arrangement fee but not on the fitter’s charge. Many fitters were below the

VAT registration threshold. HMRC argued that the fitters were subcontractors supplying Tapi, which then made an onward taxable supply to the customer. HMRC relied on Tapi’s commercial involvement, including fitter selection, estimated prices, service standards, guarantees, customer communications and assistance with complaints. The Tribunal started with the contractual arrangements and examined whether economic reality contradicted them. It concluded that the fitting service was supplied by the fitter to the customer and that Tapi acted as a disclosed agent for the customer. Operational involvement did not, by itself, make Tapi the principal supplier. A small group of invoiced-fitting transactions was treated

differently because Tapi accepted those as its own supplies. The case provides a practical framework for retailers and platforms arranging third-party services. Written contracts should clearly identify the contracting parties, agent’s role, separate fees, payment obligations and responsibility for performance. Customer-facing material, quotes, guarantees, complaints processes and payment flows must align with that structure. The decision does not mean direct payment always proves agency. Courts assess the whole arrangement, and inconsistent conduct can override labels. Businesses should test whether the intermediary controls the service, assumes performance risk, sets binding terms or presents a single composite supply. Where independent providers are.

Official and external sources: FTT judgment: Tapi Carpets Ltd | Crowe analysis of Tapi Carpets