In Marshalls Bathroom Studio Ltd ('Marshalls') v HMRC [2020] TC07753, the First Tier Tribunal (FTT) found that output tax was due on payments made by Marshalls' customers directly to sub-contractors because the sub-contractors were working for Marshalls.  

Marshalls provides the design, manufacture, supply, and installation of bathrooms. On its website, it claims to provide a full service: “We provide the complete service from initial discussion to planning and designing.....”

  • Marshalls provides the customer with a quotation but makes no mention that it uses sub-contractors.
  • The work was done by Marshalls and in some cases, Marshalls subcontracted fitters, plumbers and tilers. These were non-VAT registered.
  • An invoice is raised on completion and customers are requested to make direct payments to any sub-contractors who had provided their services.
  • Marshalls treats the supplies as VAT-inclusive and accounted for output tax on money received except where money was paid out directly to sub-contractors.  

HMRC raised a VAT assessment for £22,615 on the basis that the whole contract was supplied by Marshalls to the customer and the contractors worked for Marshalls.  

Marshalls Appealed the assessment on the basis that its customers were aware from the outset when a subcontractor was to be involved. The customer was involved in the process of deciding whether to engage a subcontractor or wait for the in-house team, with Marshalls merely taking a co-ordinating or introductory role.  

The FTT found that Marshalls was not acting as an agent for the customer or for the sub-contractors. Instead, the fitting supplies were by Marshalls to the customer, with the sub-contractors supplying their services to Marshalls. The FTT found these were on the basis of:

  • The contractual relationship was between the customer and Marshalls.
  • The decision as to whether sub-contractors were hired was made by Marshalls without reference to the customer.
  • The first time a subcontract was mentioned to the customers was when payment was made.
  • After job completion, any complaints were made to Marshalls.  


What type of decision can you appeal? What are your different options when you disagree with HMRC? What are the key steps in making an appeal?

CIS: Construction Industry reverse charge
What is the CIS reverse charge? How do you account for VAT? Can you still cash account for VAT? What administrative changes do I need in order to operate the reverse charge?

Construction Industry Scheme (CIS)
What is the Construction Industry Scheme? Who does it apply to? How does it work? Can a property investment business be a contractor?

External links

Marshalls Bathroom Studio Ltd (Marshalls) v HMRC [2020] TC07753