HMRC is currently challenging some retailers who sell items like flooring, kitchens, and bathrooms and then refer customers to independent contractors for fitting. HMRC often argues that this counts as a single supply of both goods and fitting, meaning the retailer is responsible for charging VAT on the whole amount. This can create problems when the fitter isn’t VAT-registered.

In a recent case (United Carpets (Franchisor) Limited v HMRC), the Tribunal ruled in favour of the retailer. The key reason? The retailer had made it clear (through in-store signage) that it did not provide fitting services. Instead, the store only introduced customers to fitters. The contracts and payments were directly between the customer and the fitter.

What this means for retailers:

• To reduce the risk of a VAT challenge, make sure your paperwork and processes clearly show that goods and fitting services are two separate supplies from two different suppliers.
• Contracts, signage, and communications should all support this separation, both legally and in practice.