A recent First Tier VAT Tribunal determined that an assessment issued by HMRC to a hairdresser was not valid. It is a useful decision about the scope of the VAT land exemption, albeit only a First Tier decision so it does not create caselaw. The hairdresser rented two first floor rooms above his salon to two self-employed beauticians. He provided them with heat and light, a shower, staff restroom, toilet, advertising via his website and the hair salon’s window, and his receptionist dealt with the beauticians customers also.
HMRC argued unsuccessfully that the additional services changed the nature of the supply beyond a “right over land”. HMRC also considered that the method of calculating the rent (not a set fee but a percentage of the beauticians turnover) was an indicator that the supply should have been VAT standard rate.
