Cutting edge law

SPEARMINT RHINO VENTURES (UK) LTD v REVENUE & CUSTOMS COMMISSIONERS (2007)

[2007] EWHC 613 (Ch)

Ch D (Mann J) 23/3/2007

VAT - AGENCY

AGENTS : ENTERTAINMENT : FEES : LAP DANCING CLUBS : PERFORMERS : SUPPLY OF SERVICES : LIABILITY TO ACCOUNT FOR VAT ON SUPPLY OF ENTERTAINMENT PROVIDED BY DANCERS : ACTING AS PRINCIPAL OR AGENTS FOR CLUB

Dancers who entertained customers at clubs by dancing for them or socialising with them in private rooms were not acting as agents for the owner of the clubs. When negotiating and receiving fees from customers they were acting on their own behalf, not for the club owner. Therefore the club owner was not liable to account for VAT on the supply of the services provided by the dancers.

The appellant company (S) appealed against the decision of the VAT and duties tribunal that it supplied entertainment services to customers of its clubs in the form of female dancers and was therefore required to account for VAT on those supplies. Customers at S's clubs were entertained by women dancing or socialising with them. S entered an agreement with each dancer obliging her to attend for a minimum number of shifts per week, to provide appropriate entertainment, and to abide by a code of conduct; in turn S provided the premises, and services such as security, music, lighting, dressing rooms and advertising. The dancers were self-employed and responsible for their own taxes. They paid S a fee per shift to ply their trade, as well as a fee every time they arranged a "sit-down", which meant a period of dancing or companionship in a private room, with a customer. No other sums passed between S and the dancers: they kept all the fees they received from customers for dances and sit-downs. Those fees were fixed by S but the dancers could accept any amount of gratuities. When dancing privately for customers they could exclude and admit people as they chose, and the content of their performances was at their discretion. The dancer's agreement with S was personal in nature, and she was free to perform elsewhere. The tribunal found that S rather than the dancers provided the relevant entertainment services through the dancers as agents and therefore it was liable to account for VAT on those services. S submitted that the tribunal had wrongly taken into account the level of control that it could exercise over the dancers, and had failed to take into account all relevant parts of the contractual relationship. It further submitted that the irresistible inference from the documents was that the dancers were operating their own respective businesses at its premises.

HELD: It was a very forced construction of events, if it was possible at all, to say that the dancers were contracting as agents for S. The agreement between S and each dancer was a licence permitting her entry to the premises so that she could ply her trade, and it was not a sham. Nothing in it suggested that the dancer was vested with any authority to do anything on behalf of S. It was true that S exerted some control over the dancer, which could be consistent with an agency, but it did not create an agency. None of the other documents to which the dancers were party suggested the existence of an agency. Although the agreement was an important part, it was not the whole picture. However, other factors also pointed away from agency. Of crucial significance was the fact that the entirety of fees for dancing and for sit-downs was kept by the dancers. That demonstrated the genuineness of the situation in which the dancer engaged and performed in her own right. She chose which customers and the number of them she wished to perform for, and whether or not to have a sit-down with a customer. The fact that she had to pay a fee to S when she arranged a sit-down did not mean that she negotiated the sit-down on behalf of the club; it was on her own behalf. Of course S benefited from the dancers' activities, and to an extent it controlled their activities, but the relevant question to ask was whether, when a dancer reached an agreement with a customer, she was making an agreement between the customer and S. Plainly she was not. In short, the evidence of the relationships did not demonstrate an agency, Kieran Mullin Ltd v Customs and Excise Commissioners (2003) EWHC 4, (2003) STC 274 applied and Cronin (t/a Cronin Driving School) v Customs and Excise Commissioners (1991) STC 333 distinguished.

Appeal allowed

Posted By: Old Git, Apr 10, 12:53:50