VAT on lapdancing club vouchers?

Posted: 20th December 2016

Credit cardPeople might think that the work of tax lawyers is technical and dry, but that is by no means always so. In one case, the Court of Appeal considered a VAT dispute in respect of vouchers issued to punters at lapdancing clubs, Secrets.

Using credit and debit cards, the vouchers were bought by customers of a number of clubs, largely towards the end of an evening when they had run out of cash. Punters were charged a 20 per cent commission on purchasing the vouchers and self-employed dancers who received them were charged another 20 per cent on cashing them in.

Vouchers with a face value of £22.5 million were issued by the clubs over a three-year period. In seeking a VAT refund totalling more than £540,000, the clubs argued that they were not obliged to account for VAT on the commission paid by dancers. Their claim was, however, rejected by specialist tax tribunals.

In dismissing the club’s appeal, the Court noted that the commissions were, on the face of it, very high. It was for the clubs to show that they reflected the fair market value of services that they provided in administering and operating the voucher scheme and that they should thus be zero-rated for VAT purposes. On the evidence, they had failed to discharge that burden.