Judgment summary
Lucky Voice Group Limited operates karaoke venues in London and Brighton. It submitted an Error Correction Notice on 2 February 2024 claiming a refund of £262,152.66 in output tax, covering VAT quarters 9/20 to 3/22, on the basis that charges for private karaoke rooms qualified for the temporary reduced rate under item 1 of Group 16 of Schedule 7A VATA 1994 (1)(4).
The Tribunal considered whether the supply was a 'right of admission' to a 'similar cultural facility' to the enumerated attractions in Group 16 (shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas and exhibitions), the relevance of HMRC guidance and ministerial statements, and whether HMRC's treatment of tenpin bowling was relevant to fairness or fiscal neutrality (5).
The Tribunal heard live evidence from Charles Elek, managing director, and Megan Stoughton, Head of Finance, and conducted a site visit to Lucky Voice Holborn (7)-(9). It found both witnesses credible (9).
The Tribunal ultimately dismissed the appeal, holding that the payment was not for 'admission', that the supply was not 'similar' to the enumerated facilities, though it was found to be 'cultural', and that arguments based on fiscal neutrality and unfairness (regarding HMRC's differing treatment of tenpin bowling) both failed (117)(123)(131)(136)(140)(141).
Background
Lucky Voice was founded in 2005 by Martha Lane-Fox and Nicholas Thistleton-Smith, with a stated mission to 'spread happiness' through an 'unforgettable singing experience' (81). In March 2020 it operated four venues, in Soho, Islington, Holborn and Brighton, with 33 private karaoke rooms accommodating up to 366 customers (82). Business was significantly affected by Covid-19, with venues closing on 20 March 2020, briefly reopening between October and December 2020, and fully reopening in May 2021 (83).
Each venue has a communal bar area open to the public without an admission fee, and private karaoke rooms which are generally soundproofed, fitted with a touch-screen terminal for song selection from a catalogue of about 13,000 songs, a lyrics screen, wireless microphones, seating, lighting and décor (84)-(92). Rooms are hired on an hourly, per-person basis, with receipts describing charges as 'room hire' (92)(94).
The temporary reduced rate of 5% was introduced under the Value Added Tax (Reduced Rate)(Hospitality and Tourism)(Coronavirus) Order 2020 (SI 2020/728), applying from 15 July 2020, later extended and modified by subsequent orders and by sections 92 and 93 of the Finance Act 2021 (34)-(36).
Lucky Voice became aware in August 2023 of HMRC's treatment of tenpin bowling venues, including All Star Lanes, Ten Entertainment plc and Hollywood Bowl plc, which had reclaimed VAT on bowling and associated karaoke activities under the temporary reduced rate (106)-(110). HMRC subsequently reversed its position with All Star Lanes on 31 May 2024, shortly after rejecting Lucky Voice's own claim on 17 May 2024 (111).
Core dispute
The central issue was whether Lucky Voice's supply of private karaoke rooms constituted a 'right of admission' to a facility 'similar' to the 'cultural events and facilities' enumerated in item 1 of Group 16 of Schedule 7A VATA 1994, namely shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas and exhibitions (2)(3)(5).
Lucky Voice accepted that its supply was not admission to an event and did not fall within the enumerated list, so it relied on the supply being 'similar' (5(1)). It argued that per-person pricing, restrictions on entry, and collective enjoyment within groups showed the supply was admission-based and comparable to cinema admission, and that karaoke rooms were 'similar cultural facilities' applying the reasoning in Erotic Center BVBA v Belgium (Case C-3/09) (11)-(13).
HMRC contended the supply was the hire and exclusive use of a private booth with equipment, not admission, relying on the EU Implementing Regulation's exclusion of 'use of facilities' from admission and on The Young Driver Training Ltd v HMRC [2023] UKFTT 271 (TC) (18). HMRC also argued the activity was not sufficiently similar to the enumerated attractions and was not 'cultural' in the relevant sense, relying on English Bridge Union Ltd v HMRC (Case C-90/16) (19)-(20).
A further dispute concerned the relevance of HMRC's guidance of 9 July 2020, the Chancellor's speech introducing the legislation, and HMRC's differing treatment of tenpin bowling venues, raised by Lucky Voice as demonstrating unfairness and a breach of fiscal neutrality (5(2))(5(3))(14)-(16)(22).
Court findings
The Tribunal held that exemptions such as the reduced rate must be construed strictly, though strict construction is not the same as restrictive construction (25). It rejected HMRC's submission that strict construction is 'particularly marked' where not mandated by EU law, distinguishing News Corp UK & Ireland Ltd v HMRC [2023] UKSC 7 (26).
On 'admission', the Tribunal found that admission ordinarily refers to shared collective enjoyment, and that the contractual documentation (referring to 'room hire', 'room bookings' and 'total room cost') pointed to exclusive use of a room rather than admission (113)-(116). It concluded that the payment was not made for admission, meaning the appeal failed on this basis alone (117).
On 'similarity', considering common features such as curation, audience orientation and staging, the Tribunal found the degree of active participation by customers was not a weighty factor against Lucky Voice, since several enumerated attractions (fairs, amusement parks) also involve active participation (118). However, it found that the lack of interaction between different booking groups, each isolated in a soundproofed room, distinguished the supply from the collective public enjoyment characteristic of the enumerated facilities, and concluded the supply was not 'similar' (120)-(123).
On 'cultural', the Tribunal accepted that culture is country-specific and encompasses both highbrow and popular culture, and found that Lucky Voice's UK-curated song catalogue, scale of operation, and association with tourist bodies supported a finding that the private karaoke rooms were a cultural facility (125)-(131).
On fiscal neutrality, applying Rank Group plc v HMRC (Joined cases C-259/10 and C-260/10) and Leisure, Independence, Friendship and Enablement Services Ltd v HMRC [2020] EWCA Civ 452, the Tribunal found that a typical consumer would regard Lucky Voice's karaoke rooms as different from both tenpin bowling and the enumerated attractions, so the fiscal neutrality argument failed (132)-(136).
On unfairness regarding HMRC's differing treatment of tenpin bowling, the Tribunal followed Ingliston Driving Experiences Ltd v HMRC [2025] UKFTT 564 (TC) in declining to take into account HMRC's treatment of another taxpayer, given confidentiality constraints and limited knowledge of that case's circumstances, and held that its task was to apply the correct legal interpretation rather than extend HMRC concessions by analogy (137)-(140).
Outcome
The appeal was dismissed (141). The Tribunal held that Lucky Voice's supplies of private karaoke rooms did not qualify for the temporary reduced rate under item 1 of Group 16 of Schedule 7A VATA 1994, principally because the payments were not for a 'right of admission' and, in any event, were not 'similar' to the enumerated cultural events and facilities, notwithstanding a finding that the supply was 'cultural'. The grounds based on fiscal neutrality and unfairness also failed.
Major issues / areas of contention
- Whether Lucky Voice's charges for private karaoke rooms constituted a 'right of admission' within item 1 of Group 16 of Schedule 7A VATA 1994.
- Whether the private karaoke rooms were a 'facility' 'similar' to the enumerated list of shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas and exhibitions.
- Whether the private karaoke rooms constituted a 'cultural' facility for the purposes of the provision.
- The relevance of HMRC's published guidance of 9 July 2020 and the Chancellor of the Exchequer's speech to the construction of item 1.
- Whether the principle of fiscal neutrality was engaged by comparison between karaoke rooms and tenpin bowling or the enumerated attractions.
- Whether HMRC's differing treatment of tenpin bowling operators (including All Star Lanes and Hollywood Bowl plc) amounted to unfairness relevant to Lucky Voice's appeal.
- The correct approach to interpreting reduced-rate provisions strictly without adopting a restrictive construction.