Page 64 - CFJ_Apr26

ADVICE & INFORMATION

Autumn Murphy

VAT and the truth about fitting

A recent tribunal ruling on carpet sales and fitting services highlights how VAT liability hinges on
contractual clarity and the real economic substance of supply arrangements, says Autumn

HILE much of the world of model is that customers can choose using fitters as subcontractors - with
WContract Flooring Journal relates to have their new carpet fitted by an the fitters delivering part of the
solely to commercial work, there are independent, self-employed fitter. The overall supply to the customer on the
quite a number of firms that undertake stores don’t offer fitting themselves. company’s behalf. This argument rested
domestic AND commercial work. For The stores simply introduce the on the idea that customers came to
them, a recent VAT case involving the customer to a fitter from a local pool. United Carpets for a finished, fitted
supply and fitting of flooring will make Around three-quarters of customers carpet.
for interesting reading. who buy carpet at their stores choose The tribunal’s decision:
When a customer walks into a carpet the fitting service. United Carpets wins
shop, they’re usually assumed to be United Carpets considered that The tribunal sided firmly with United
after one end result: a fully fitted carpet. the fitting services were separately Carpets, confirming that the stores
But what happens if you don’t carry supplied to customers by the fitters and were only supplying unfitted carpet.
out the fitting with your own staff, but accounted for VAT only on its sales of There were two entirely separate
instead help the customer to find an carpet. supplies - the supply of goods (carpets,
independent fitter? What seems like a underlay, etc), by United Carpets to
simple sale has raised a complex VAT the customer, and the supply of fitting
question: when should the carpet shop services by the independent fitter to the
charge VAT on the fitting services? customer.
That very question sat at the heart of This means United Carpets only needs
a recent first-tier tribunal case, United to charge VAT on the carpet, while the
Carpets (Franchisor) Ltd v HMRC [2025] fitter is responsible for any VAT on the
UKFTT 00895 (TC). In the sections that fitting services.
follow, we’ll unpack what happened, Why the tribunal ruled in United
why the decision matters, and how you
can protect your business from a similar Carpets’ favour: Key findings
There were a number of reasons why
VAT challenge. the tribunal accepted United Carpets’
Single or separate supplies position.
From a VAT perspective, if the carpet First, customers had the freedom to
shop and the fitter are separate choose whether to use a fitter in the
businesses, most businesses would store’s ‘pool’; there was no obligation to
generally expect there to be two distinct do so when purchasing carpet.
separate supplies for VAT; one made Next, fitters were self-employed, not
by the carpet shop for the sale of the ‘Who is supplying subcontractors or employees of United
carpet, and another by the fitter for the what, and to whom?’ Carpets. They were under no obligation
installation work. to accept work.
However, in this case, HMRC argued determines the VAT Also, contracts and the commercial
there was a single supply of a fitted and economic reality confirmed that
carpet made by the carpet shop, outcome United Carpets did not provide fitting
meaning that United Carpets should services. In particular, terms and
have accounted for VAT on both the conditions explicitly stated that United
carpet and the fitting services. HMRC’s View: ‘It’s a single supply’ Carpets did not provide or guarantee
Background: HMRC saw things differently. fitting services and only facilitated
How United Carpets operates They argued that United Carpets introductions to fitters.
United Carpets (Franchisor) Ltd is was supplying a single product: a fitted Also, terms and conditions, invoices,
the franchise company behind the carpet. In HMRC’s view, this meant and in-store notices clarified that
well-known United Carpets brand. Its United Carpets should have accounted fitting services were separate contracts
franchisees sell carpets, vinyl, laminate, for VAT on both the carpet and the between the customer and the fitter.
underlay and other flooring products fitting, because it was effectively And invoices listed fitting costs only as
across the UK. supplying both. estimates and weren’t included in the
A key feature of their business HMRC said United Carpets was total payable to United Carpets. 

64 CFJ April 2026 www.contractflooringjournal.co.uk
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