Lapdancers to pay VAT after High Court battle with clubs

Nothing in life is certain except death and taxes. Yesterday, it was the freelance lapdancer who had to face up to the harsh reality of that ancient maxim after the High Court in London ruled that they were personally liable to pay VAT.

In a case brought by an American-owned chain of lapdancing clubs, a judge found that the dancers must give 17.5 per cent of their takings to HM Revenue.

Mr Justice Mann said it was the lapdancer who was liable, not the club. Explaining his ruling, the judge described the financial transaction in the business of dancers gyrating semi-naked round a pole for money. Setting out a typical tariff, he said: "A fee of £10 is charged for a semi-nude dance; £20 is charged for a nude dance. The dance is arranged as between the dancer and customer. In addition to those services, the dancer and the customer can agree what is called a 'sit down'. For £250 (a sum which is in fact negotiable) a woman can be engaged to sit and socialise with the customer for an hour."

Spearmint Rhino was appealing against a VAT tribunal decision which found the lapdancing club was liable for the tax.

Yesterday, the judge described the Spearmint Rhino club in Tottenham Court Road, London, as a "typical example" of a lapdancing venue. He said: "A member of the public pays £8 for admission and on entering goes into an area in which he (or she) may drink, socialise, eat and watch partially clad women dancing on a podium. At any one time (depending on the day, time and availability), there are between 20 and 140 young women available to provide the entertainment services in issue in these proceedings."

David Milne QC, representing Spearmint Rhino, had told Mr Justice Mann at a hearing in January that the dancer has to pay the club for the facilities she uses and there was no contract between the club and the men she "entertained".

He said the tribunal had made a mistake in ruling the dancers were Spearmint Rhino's agents by relying on the degree of control the club has over them.

Each dancer is bound by a Dance Performance Licence, which describes the clubs as operating a "business establishment at the premises where live nude, semi-nude and/or bikini dance entertainment is presented to adult members of the general public".

The dancer can book booths at the club to perform but must pay damages if she misses a session.

She also agrees to dance and try to maximise sales and "entertainment" but is subject to a code of conduct.

The judge said in his ruling yesterday that, under that code, the dancer agrees not to "handle customers" or to allow them to handle her, and not to perform in an obscene or otherwise illegal or unlawful way.

Mr Justice Mann said he agreed with Spearmint Rhino's case. "It seems to me to be a very forced construction of events, if it is possible at all, to say that the dancers are contracted as agents for the club."

He said the operation at the clubs tended to suggest that the dancers are performers "plying their self-employed trade at the club in their own right".

Peter Stringfellow, who owns his own lapdancing clubs in London, welcomed the ruling. He said: "This is simply a clarification of a business practice that we have been adopting since we opened 11 years ago. The girl pays VAT and we pay any VAT on any commission."

A highly lucrative trade

* A visit to a lap-dance club has become a staple of the UK businessman's night out. Such is the appetite for leering at nubile women dancing round poles or on tables, there are now dozens of clubs competing for the multi-million pound business.

Peter Stringfellow and the Spearmint Rhino chain of clubs have become household names. While the dancers can earn up to £200,000, and many don't pay tax, the clubs take much more in commissions and entry fees.

Spearmint Rhino, which won yesterday's High Court battle against HM Revenue over VAT tax, has two clubs each in London and Birmingham, as well as clubs in Norwich, Harrogate, Bournemouth, Sheffield and Heathrow.

In 2004, Stringfellows, which owns table-dancing clubs in London and Paris, was reported to have an annual turnover of between £6m and £7m.

There are also scores of less-famous clubs around the country, many of them attracting illegal workers. The police have been concerned about links between illegal clubs and human trafficking.

Recently, HM Revenue staff were reported to be concerned that Midlands lap-dance venues were supporting a shadow economy in which millions of pounds went undeclared each year.

In Scotland, where there are 16 clubs, insiders estimate they are raking in £35m a year. Scottish police have expressed fears that the industry is being used for money-laundering and that some clubs have gangland links.