The case of Spearmint
Rhino Ventures (UK) Ltd v The Commissioners for HM Revenue &
Customs (2007) concerns self-employed lap
dancers.The whole judgement is
well worth reading for its sheer entertainment value and clear-
sighted good sense, but here are the important
bits.
Mr Justice Mann began
his judgment by setting out how SR's club in Tottenham Court Road
works:
"The club is
described as a “gentleman’s club”. A member of
the public pays £8 for admission and on entering goes into an
area in which he (or she) may drink, socialise, eat and watch
partially clad women dancing on a podium. At any one time
(depending on the day, time of day and availability) there are
between 20 and 140 young women available to provide the
entertainment services in issue in these proceedings. Some of them
will be those dancing on the podium. These proceedings do not, at
least directly, concern that activity. The activities which concern
me are those provided as a result of more direct engagement between
the women and the customer. For a sum of money, the women can be
engaged to perform private dances for the customer. For this
purpose the customer (with or without accompanying people) and the
dancer go to one of several booths where the private dance takes
place. A fee of £10 is charged for a semi-nude dance; £20
is charged for a nude dance. Each dance lasts for a
“track”, i.e. about three minutes. The dance is
arranged as between the dancer and the customer. In addition to
those services, the dancer and the customer can agree what is
called a “sit-down”. For £250 (a sum which is in
fact negotiable) a woman can be engaged to sit and socialise with
the customer for an hour. Any additional dancing services will be
the subject of a separate arrangement. Dancers are paid in cash or
in Rhino chips – chips issued by the club on a credit card
transaction and which can be used as a form of currency in the
club."
"It is common
ground in these proceedings that the women are not employed by the
club. They are all self- employed. They pay a sum to the club which
allows them to ply their trade for a session of eight hours (it is
£15 for a daytime session and £80 for an evening
session). They enter into an agreement described as a
“licence” which entitles them to enter and dance (and
to some extent obliges them to as well). They also have to pay
£40 every time they arrange a sit-down. There are some limited
tips which they habitually or traditionally pay to various people,
but I need not dwell on those. Other than that, no other sums pass
between the club and the dancers. The monies which are paid for the
dances and for the sit-downs go to the dancers. The customers do
not pay the club for the dances and sit- downs. The club obviously
provides the premises at which the dances take place, and it
provides additional services such as the services of a “house
mother” who helps to advise and look after them (and who is
traditionally tipped £3 by each dancer for each session), and
the assistance of security staff who will confirm the bargain made
for each sit-down and who will apparently assist in the persuasion
of a customer who might otherwise be minded not to
pay."
"The dispute
between the parties is, as I have indicated, whether the
entertainment services are supplied by the club or by the dancers.
HMRC says that those services are supplied by SR to the customer.
They are supplied through the dancers whom they have engaged.
Accordingly, it is said that SR is obliged to account for VAT in
respect of the consideration supplied for the services. SR says
that the services are provided by the dancers themselves and not by
the club."
And then the critical
part of his judgment goes like this:"If one asks
whether the club benefits from the dancers’ activities, then
of course it does. If one asks whether it controls their
activities, then again it does, to an extent. But neither of those
questions is the relevant one. If one asks the question –
when a dancer reaches an agreement with the customer, is she in
fact making an agreement between the club and the customer, the
answer is plainly not. The monetary arrangements point the other
way, and the other factors do not bring the situation back towards
agency."
Spearmint Rhino won
their case and they are only liable for VAT on the sums the dancers
pay to the clubs. Incidentally the case was widely misunderstood by
the press. The Daily Telegraph reported it under the headline
"Strippers are exposed to the taxman" and it is quite true that lap
dancers are now accountable to the VATman for the whole of their
income from customers. But in practice most lap dancers are likely
to be receiving less than the VAT threshold of £64,000 per
year, and if they get close to it they would be well advised to
negotiate some time off with SR.
1. Do-it-Yourself
