VAT & Pay the Fitter

The First-tier Tribunal released its decision in Tapi Carpets Ltd, which was a 'pay the fitter' case resulting in VAT assessments of £13m+.

Tapi sells floor coverings. Customers wanting their flooring fitted could arrange it themselves or pay Tapi a separate arrangement fee to be introduced to a fitter from a vetted pool of independent tradespeople. The fitter attended the customer's home and was paid the fitting fee directly on the day. Tapi charged VAT on the arrangement fee and on its delivery and care package, but treated the fitting itself as supplied by the fitter to the customer. Most fitters were sole traders below the registration threshold, so no VAT was charged on the labour.

HMRC argued that the economic reality was sub-contracting. Tapi vetted the fitters, allocated the work, quoted the price from its own rate card and offered a ten year fitting guarantee. On that analysis the fitters supplied Tapi, and Tapi made an onward supply to the customer as principal.

The tribunal disagreed. The written terms said Tapi acted as agent and the tribunal found this matched what actually happened. The fitters performed the work, carried liability for it and bore the risk of non-payment. The quoted price was an estimate drawn from market rates, and fitter and customer were free to renegotiate on the day without reference to Tapi. The guarantee was a retail promise forming part of the arrangement service, not an assumption of responsibility for the fitting.

Treating a single payment from customer to fitter as discharging two separate supplies was commercially unrealistic. The tribunal remarked that HMRC's analysis rested on the arrangements they considered Tapi should have adopted rather than those it actually adopted.

Two points deserve attention. Tapi's customer-facing language was loose, with emails and web copy repeatedly suggesting Tapi would carry out the fitting, and it still succeeded because the contracts and the operational facts held up. Not every business will be in that position. This is also HMRC's second defeat on comparable facts, following United Carpets case in 2025.

Any business introducing customers to self-employed trades should test its own paperwork against this decision. The sums at stake are rarely small, because the labour element often sits outside the VAT net altogether.