What’s the link between lap-dancing, land and VAT?
It’s an interesting question and one which a VAT tribunal has recently been considering.
Dancers at the Sugar & Spice club in the UK have to make payments to the club for the use of their facilities and the dancers earn their income directly from customers for dancing on the dance floor or private dancing in separate rooms.
The dancers pay the club a fee of £40 together with a commission of 25% on the fee they receive for private dances in the separate rooms.
When it came to completing their VAT return, the club argued that the fee of £40 charged to the dancers was a taxable supply (i.e. VAT would be charged) but the commission charged was for an exempt supply of land (i.e. they argued that the payment was for the provision of the room which they claimed was land and as a result VAT would not be charged).
Perhaps unsurprisingly, the tax authorities argued that the commission was a taxable supply and was in respect of services provided to the dancers such as advertising, music, heating and security. They argued that this amount should be liable to VAT at the standard rate.
A decision couldn’t be reached between the Sugar & Spice club and the tax authorities so the situation went to a VAT tribunal.
The tribunal concluded that it was more than a simple provision of land (i.e. because of the provision of advertising, security, etc) and as a result VAT would be chargeable on the total amount.
So there you go. The next time you happen to be in a lap dancing club you can ask the young lady in front of you whether she knew that the room she is dancing in involves a standard rated supply rather than an exempt supply…