Page 66 - CFJ_Apr26

ADVICE & INFORMATION

A story of VAT, fitting services, and carpet sales

Also relevant was that fitters set from the customer, and then pays the Separate the payment
their own final prices, and United fitter afterwards. Never collect payment for the fitter. The
Carpets never received any fitting fees. In that case, the fitter is likely to be customer should pay the fitter directly.
Customers paid fitters directly, and considered to be working for the shop If you quote an ‘estimated fitting
United Carpets received no financial not the customer. The shop will be price’, make sure it’s labelled clearly as
benefit from the fitting services. responsible for delivering a fitted carpet. an estimate, not an amount you collect.
Last, any additional work or The customer will only deal with the Commercial and economic reality
adjustments to fitting costs were shop, not the fitter. And the shop will Your invoices, receipts, and website
arranged directly between the customer be the principal supplier, and the fitter should accurately reflect what happens
and the fitter, without involvement from a subcontractor (or in some cases an in practice.
the store. employee). For example, if the documentation
The ‘free fitting’ In that setup, HMRC would almost states that the fitters collect their own
One aspect that did complicate matters certainly argue there’s a single supply fees but, in practice, the store collects
was that United Carpet sometimes and the retailer would owe VAT on the these payments, this inconsistency may
advertised offers of ‘free fitting’. whole amount (carpet and fitting). blur the distinction between the two
The commercial reality was that ‘free Even where fitters are self-employed, supplies. As a result, HMRC could argue
fitting’ was simply a discount on the if the paperwork and economic that you are making a single supply,
carpet. United Carpets did not pay for and commercial reality suggest the which would make you liable for VAT on
the fitting. retailer controls the fitting process or the fitting services.
For example, a customer might pay guarantees the work, it may still count Both your documentation and what
£2,400 for a carpet with ‘free fitting’. as a single supply. actually happens in practice should
If the fitter’s estimated fee was £240, The issue extends beyond VAT show a clear separation between the
United Carpets would reduce the carpet supply of carpet and the fitting services.
price from £2,000 + VAT (£2,400 total) considerations. If fitters could be
to £1,800 + VAT (£2,160 total). This left deemed to be employees by HMRC, Review your marketing
the customer paying the fitter directly then this may also give rise to PAYE Phrases such as ‘free fitting’ offers can
for the installation of £240. obligations. cause confusion. If you use that phrase,
Invoices issued by United Carpets How to protect your business make sure it’s backed by documentation
would include a note about the If your business introduces independent showing it’s really a discount on the
estimated fitting charge, however this fitters to customers, rather than flooring, not a bundled service.
was not an actual cost and its only providing fitting services yourself, it Summary
purpose was to enable the discount is essential to ensure that both your The United Carpets case confirms
calculation. contractual arrangements and the that retailers can introduce customers
In some cases, the fitter would charge commercial reality are clearly defined to independent fitters without
a higher amount because of issues with and consistent. becoming liable for VAT on fitting
moving furniture or staircases. Any Make it clear who does what services, provided the arrangements
extra costs were negotiated between are genuinely separate in both their
the fitter and customer, with no Your terms and conditions should clearly contractual terms and their economic
explain that you sell flooring materials
involvement of United Carpets. only, fitting is a separate service and commercial reality.
What this means for the trade supplied by an independent fitter, and However, the case also highlights
The United Carpets decision provides you are not responsible for the standard how easily that separation can break
clarity for firms who introduce of fitting work and your role is only to down. If the boundaries become blurred
customers to fitters and who operate introduce the fitter to the customer. — for example, if the retailer collects
with clear separation between the Customers should know that fitting is payment for the fitter, sets the fitter’s
supply of flooring and fitting services. prices, or has control over how fitting
But it also serves as a warning for provided by independent fitters, and the work is carried out — HMRC is likely
businesses where the separation is not retailer is not responsible for the fitter’s to challenge the arrangement and
clear. work. United Carpets reinforced this treat the fitting as part of the retailer’s
If your setup isn’t properly message through instore-notices, staff taxable supply.
documented, or if you blur the line explanations, and terms and conditions. As the tribunal itself put it, it all
between ‘selling flooring’ and ‘supplying Keep contacts separate comes down to the simple but powerful
fitted flooring’, HMRC could still argue There should be two distinct question:
you’re making a single supply and hit agreements - one between your ‘Who is supplying what, and to whom?’
you with an unexpected VAT bill. business and the customer (for the If you can answer that question clearly
How others could lose in different goods), and one between the customer and your paperwork, invoices, and
circumstances and the fitter (for fitting). day-to-day conduct all reflect the same
Imagine a carpet shop that advertises You should not sign or handle the reality your business will be in a strong
‘we’ll fit your carpet for you’, takes the contract for the fitting services - that’s position to withstand HMRC scrutiny. 
full payment (for both carpet and fitting) between the fitter and the customer. Autumn Murphy is an ATT technical officer

66 CFJ April 2026 www.contractflooringjournal.co.uk
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