VAT Tips for Serviced Accommodation Operators: Save Money on Tax 

Essential VAT Tips for Serviced Accommodation Business

Serviced Accommodation has become the preferred choice for many travellers seeking a comfortable home-like experience, whether on business trips or leisurely getaways. These accommodations, with their hotel-style amenities, cater to diverse crowds, from tourists and leisure seekers to business professionals and contractors. 

Navigating Tax Implications 

While the appeal of serviced accommodation is undeniable, operators in this industry must contend with the tax implications associated with their business. One of the primary taxes to consider is Value Added Tax (VAT), which we will explore further in this article. 

VAT and Serviced Accommodation in the UK 

In the UK, residential lets typically enjoy a VAT exemption. However, once we step into the realm of supplying accommodation in settings like hotels or serviced apartments, VAT becomes standard-rated. Serviced apartments, considered similar to hotel lets, fall under this standard-rated category. 

VAT Challenge for Serviced Accommodation Businesses 

The surge in serviced apartments, facilitated by platforms like Airbnb or booking agents, presents a challenge due to a 20% VAT imposition on bookings. This hefty VAT on accommodations can significantly impact profit margins, pushing some businesses to the brink of viability. 

A Recent VAT Ruling: A Timely Boost 

In a recent VAT case, Serviced Accommodation Operators received a timely boost. This ruling provides much-needed clarity on how these operators can leverage a lesser-known VAT scheme on holiday accommodation sales through platforms like Airbnb and Booking.com, maximizing VAT efficiency. 

Understanding the Tour Operators Margin Scheme (TOMS) 

The Tour Operators Margin Scheme (TOMS) comes into play for businesses directly purchasing and reselling travel, accommodation, and specific services. Serviced Accommodation business providers fall under TOMS, provided certain conditions are met. 

Benefits of TOMS 

TOMS offers notable benefits, including a reduced VAT liability, charged only on the margin made by the serviced accommodation. It also allows for the recoverability of Input VAT incurred on indirect expenses like agent fees and accountancy fees. 

TOMS Threshold Considerations 

Businesses must check their threshold limits before deciding whether TOMS is applicable and necessitates VAT registration. Unlike the normal VAT scheme threshold of £85,000, TOMS considers taxable turnover differently, considering various factors. 

VAT Liability of the Margin under TOMS 

The VAT liability under TOMS varies – standard-rated when the tour is enjoyed in the UK and zero-rated when enjoyed outside the UK. It’s essential to understand that the temporary reduced rate doesn’t apply to the margin, and the VAT liability of in-house supplies within a Margin Scheme package remains unaffected. 

Leveraging the Recent VAT Case for VAT Savings 

The recent VAT case opens avenues for Serviced Accommodation Operators to achieve VAT savings. By meeting the conditions of TOMS, VAT can be applied solely on the margin, potentially resulting in significant savings. VAT-registered businesses may also consider reclaiming overpaid VAT from up to four years ago, subject to conditions. 

Understanding the Margin and its Impact 

It’s crucial to recognize that, subject to conditions, only the ‘margin’ counts towards the VAT threshold. This understanding can influence pricing strategy, stimulate growth, and assist with cash flow. 

Next Steps and Considerations 

While the recent case provides clarity, seeking advice tailored to your specific circumstances is advisable before taking any action. Changes in legislation or potential appeals by HMRC could impact the landscape. Community platforms sharing data with HMRC also make it an opportune time to review overall VAT compliance. 

Conclusion 

Navigating the VAT landscape for Serviced Accommodation Operators involves understanding the nuances of TOMS, leveraging recent rulings for potential savings, and staying vigilant in the ever-evolving realm of tax regulations. Understanding VAT complexities is crucial for those in the Hospitality and Tourism sector. The recent VAT ruling is a positive turn, spotlighting potential savings through the Tour Operators Margin Scheme (TOMS). This scheme has the power to simplify VAT processes and boost financial efficiency. However, caution is warranted – laws can shift, and HMRC might weigh in, so staying informed and seeking tailored advice is wise. The opportunities for enhanced VAT efficiency and reclaims are noteworthy, but ensuring compliance with broader VAT rules remains a priority. In this ever-evolving landscape, understanding TOMS details and staying vigilant will help tackle current challenges and pave the way for success in the hospitality industry. 

Get in Touch  

Lanop Business and Tax Advisors London offers personalized tax and business advisory services. Our expertise extends particularly to the Hospitality and Tourism sectors, where we provide specialized guidance tailored to the unique needs of businesses in these vibrant industries. As the hospitality industry evolves, we stay informed about changes in legislation and potential appeals by HMRC, ensuring that your business remains VAT compliant. For personalized assistance and to streamline your VAT processes, Get in Touch Today. Your success in the hospitality industry is our priority. 

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Address: 389 Upper Richmond Rd, London SW15 5QL, United Kingdom.

CEO of Lanop

Aurangzaib Chawla

At Lanop, I am providing my services as the Managing Partner and Tax Specialist. My expertise includes helping medium and small-scale businesses in their accountancy and legal requirements, business start-up support, strategic review, payroll system review and implementation, VAT and tax compliance to cloud accounting. I am also an expert in financial reporting, identifying and monitoring risks, strategic business development, client retention, market acquisition and deals closure by carefully planning my sales cycle. 

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