TC09534 - [2025] UKFTT 00594 (TC)

DCI is a limited liability partnership. The bundle we were provided with contains two different partnership agreements. The first is unsigned and undated although the blank space for the date shows the year as 2016 which suggests that it was produced at some point during 2016. This would make sense as it is stated to have effect from 1 March 2016.

The designated members are listed as Ms Jacqueline Wilson and Mr Martin Fallon. There are five other (non-designated) members of the LLP, Susan Haldane, Kristeen Wilkinson, Suzanne Shanks, Ailsa Adams and Diane Watson. As far as profit shares are concerned, the non-designated members are paid an hourly rate for teaching and office based work and some of them also receive a class administration fee which is a weekly or monthly amount. The balance of the profits is split equally between the two designated members.

The second LLP agreement is dated 22 February 2017 and effectively supersedes the earlier agreement as it is also treated as taking effect from 1 March 2016. The designated members are the same two individuals. However, there are only three non-designated members, Susan Haldane, Kristeen Wilkinson and Suzanne Shanks.

Under the revised agreement, these three non-designated members receive a percentage share of the profits of the LLP being 13%, 8% and 9% respectively until June 2016 and 14%, 9% and 12% thereafter. The balance of the profits are divided equally between the two designated members, as before.

The LLP operates four separate dance schools. Ms Wilson is responsible for running one of these schools. Each of the non-designated members runs one of the other three schools. All of the LLP members teach in other branches and provide assistance to the other members where required.

The correspondence between DCI’s representative and HMRC notes that the LLP members are responsible for ensuring that the tuition provided in their respective schools is delivered to the standards required of the partnership to enable students to pass exams. Each member is also responsible for the administration of the relevant school.

HMRC’s registration decision in relation to DCI was made on 18 April 2017 and required DCI to be registered for VAT with effect from 1 March 2016. As with Mrs Hilton, no VAT assessments or penalty assessments have been issued by HMRC.

With that background in mind, we turn now to the issues we need to determine.