The First Tier Tribunal in Tapi Carpets Limited v HMRC clarifies that a flooring retailer was not liable to account for VAT on fitting fees paid by customers directly to independent fitters, offering practical guidance for accountants on supply-chain VAT structures.
In Tapi Carpets Limited v HMRC [2026] TC09975, the First Tier Tribunal (FTT) has clarified that a flooring retailer was not liable to account for VAT on fitting fees paid by customers directly to independent fitters. The decision offers important practical guidance for accountants advising retail and service businesses on when they act as supply-chain intermediaries and when they do not.
The Facts and the Issue
The fitters supplied their services to the customers as principal, rather than to the retailer under a sub-contracting arrangement. In other words, the retailer—Tapi Carpets—was arranging customer contact between buyers and independent fitters, but was not itself procuring or reselling the fitting work as its own supply.
This distinction matters enormously for VAT. If a retailer holds itself out as the supplier of a service (even if it outsources delivery), VAT should normally be charged on the full value received. Conversely, if a retailer simply facilitates a direct relationship between customer and third-party service provider, and the customer's payment flows directly to that provider, the position is markedly different.
Why This Matters for Accountants
Many retail, construction and facilities businesses find themselves in a similar position: they introduce customers to specialist tradespeople (plumbers, electricians, fitters, decorators) and may receive a commission or arrangement fee, but the customer deals directly with the tradesperson. The Tapi Carpets decision clarifies that if the payment structure and contractual position genuinely reflect a principal-to-principal relationship between customer and fitter—not a supply chain where the retailer is the main contractor—then the retailer is not the supplier of the service and does not account for VAT on the fitter's fee.
This analysis hinges on substance over form. HMRC had to be satisfied that the retailer was not merely styling itself as an intermediary while retaining control or contractual responsibility for the work. Where a retailer genuinely plays no role in the delivery of fitting services, holds no liability for quality or timely completion, and the customer has directly engaged and pays the fitter, the retailer's VAT obligation is limited to any separate fee or commission it retains.
Practical Application
For your clients in retail, property services, home improvement or facilitation businesses, this ruling highlights the importance of clear contractual documentation. If your client simply introduces parties and facilitates a one-off encounter, ensuring that the customer invoice, payment and contractual terms are all between customer and third-party provider will be key to defending a position that VAT is not due on the service fee.
Conversely, if your client holds itself out as the supplier of the service, guarantees timely or quality completion, or invoices the customer on a gross basis and then pays the fitter net, VAT accounting on the full amount would be expected—even if a third party does the work.
The FTT's reasoning also reinforces that businesses should not conflate administrative convenience (perhaps collecting a customer payment and forwarding it to a fitter) with supply-chain legal responsibility. Where the commercial substance is that the customer has engaged the tradesperson directly, and the retailer is simply earning a finder's fee or commission, that structure should be clearly documented and applied consistently.
Wider Implications
HMRC have published their latest Trusts and Estates Newsletter, containing several important updates, including recent amendments to the Trust Registration Service requirements, signalling ongoing regulatory focus on accurate record-keeping and reporting—another reminder that supporting your VAT position with clear contemporaneous documentation is essential in all contexts.
Accountants reviewing their clients' VAT treatments should consider whether any supply chains could benefit from the Tapi Carpets analysis, and ensure that contractual and payment structures accurately reflect the commercial reality.