12 January 2022 
Andrea Marshall, Tax Specialist
Errol Willy Salons is a hair dressing salon in Cardiff.
This First Tier Tribunal case has ruled in favour of the taxpayer with regard to a 2017 £18k HMRC assessment. This was on the income from a room in the property that was let to a beautician. Leases were in place and rent was calculated based on a percentage of the beautician’s turnover.
The beautician provided their own equipment and materials; decorated and cleaned the room; and set their own prices and opening hours.
HMRC cited Byrom and contended that although Errol Willy provided a defined area, it provided a package of services rather than just the room. The services included access to the staff toilet, staff rest are, use of a receptionist, heat and light, and displaying posters in the salon window and a price list on the Errol Willy website.
The FTT decided that the only services that enabled better enjoyment of the room were the heat and light and access to the toilet facilities. The other services assisted with the business generally, but did not specifically relate to the enjoyment of the rooms.
Therefore, ‘the arrangements should be characterised as a VAT-exempt relatively passive supply of land, as the services were not such as to change that character’.
The transcript of case has not been released, but Andrea will share it when available. It may help when trying to determine whether there is an exempt lease or letting in the university context, in instances where other services are provided.
