HMRC says VAT is due on the whole fee, and a cleaner says she was a worker

Written for owners of UK cleaning businesses: contract cleaners for offices, schools, healthcare and soft FM subcontracts, domestic cleaning firms, agencies and apps, and specialists in after-builders, end-of-tenancy, window, carpet and biohazard cleaning.

The short version

1. Check who sets prices and takes payment.If you set the price, take the money and promise the clean, you are usually the principal, selling the cleaning itself, and often the employer.
2. Get both advisers and cost the back bill.Use a VAT adviser and an employment solicitor together. Cost back VAT on the whole fee, plus minimum wage, holiday pay and pension.
3. Pick one model and change how you run.Employ the cleaners properly, or run a real agency where cleaners agree their own prices and can send substitutes. Paperwork alone fails.

Picture a domestic cleaning app. You set the price, customers pay you, and your 40 cleaners invoice you as self-employed. Then two letters arrive: HMRC says VAT is due on the whole fee, and a former cleaner says she was a worker. Both turn on the same facts, so deal with them together.

The three models the law recognises

• Introductory agency: introduces self-employed cleaners to households, which engage and pay them; the agency earns an introduction fee or commission.
• Employment business: engages the cleaners as employees or workers and supplies them to work under the household's direction, and must give a key information document before terms are agreed.
• Employer: employs the cleaners and sells cleaning as its own service. Most app businesses that set the price, take the money and promise the clean are this in substance, whatever the paperwork says.

In cleaning, the red flags are that the business sets the price and the rota, issues checklists, rates and deactivates cleaners, and bars them from working for customers directly. If the cleaners are workers, they are owed the minimum wage for all working time including travel between houses, 5.6 weeks' holiday, and auto-enrolment; employees also get sick pay, notice and dismissal rights. Unlawful deduction claims reach back at most 2 years (Employment Rights Act 1996 s.23(4A)), but minimum wage enforcement is not limited that way.

The VAT question: principal or agent

A principal supplies the cleaning itself, so the whole fee counts towards the £90,000 registration threshold and carries 20% VAT once registered. A genuine agent supplies an introduction or booking service, so only its commission is its turnover. Signs of a principal: you set the price, take payment in your own name, promise the result and organise re-cleans. Signs of an agent: the household contracts with the named cleaner, the cleaner agrees the price, and you take a disclosed commission. Start with the contracts and check they reflect the economic reality (Secret Hotels2 Ltd v HMRC [2014] UKSC 16). As of Oct 2026.

Paper changes without behaviour changes fail (Autoclenz).

1. Get both advisers together.A VAT adviser and an employment solicitor at the same time, because the same facts decide both questions.
2. Model the back bill.Back VAT on the whole fee, plus the pay claim: minimum wage including travel between houses, holiday pay and pension.
3. Restructure in substance.Pick the employer model or the real agency model, and change how the business actually runs, not just the paperwork.
4. Ask before the threshold next time.For a large principal or agent question, a VAT adviser can seek an HMRC non-statutory clearance before you cross the threshold.

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