TC09596 - [2025] UKFTT 00895 (TC)

The Appellant registered for VAT, with effect from 1 July 2012.

The Appellant is a franchise business and the majority of its stores are franchise stores. The Appellant’s main income stream is franchise commission and the Appellant takes a commission on all items sold. Franchise commission, until recently, was calculated at 9.5 % of net order value (net of discount). This has risen to 10.5%. In respect of the Appellant’s turnover, of the turnover from carpets, other flooring and beds, 10% relates to beds, with the remaining 90% split between carpets and other flooring. The Appellant estimates that carpets account for 83.3% of all flooring sales, and that 75% of carpets were sold with fitting.

Each store has a pool of fitters who take on fitting work referred to them by the Appellant. Some fitters have been part of the pool for many years, while others come and go. In terms of allocating fitters to particular jobs, it is either the store manager, the warehouse person or another member of staff who is in the warehouse who writes up the fitting sheets and matches customers to fitters, determining which fitter is allocated to which customer in the fitting diary. The store is aware of how many fitters are available each day and, broadly, knows the fitting capacity of each fitter/team of fitters for each day. The Appellant’s staff book orders to that level for any given day. Sometimes a customer requests to be referred to a specific fitter. If that fitter remains in the pool of fitters for that store, then the Appellant will accommodate the request. The turnover of fitters in each pool varies from store to store.

The Appellant estimates that approximately 75% of customers purchasing carpets ask to be introduced to a fitter. There is no franchise commission charged by the Appellant in respect of the price paid by the retail customer for fitting services. That price is charged and retained by the fitter concerned. If the total sales invoice value after discount is a value of £500, that franchise would pay 10.5% franchise commission, i.e., £52.50.

The Appellant also sold carpets online, although such sales made up a tiny fraction of turnover (approximately 1%, with that number declining over time). As of 2 September 2024, the Appellant no longer sells carpets online.