Recent VAT ruling  gives potential VAT saving opportunity for the Serviced Accommodation sector

A RECENT VAT case has given Serviced Accommodation Operators a timely boost. The case has provide much needed clarity on how Serviced Accommodation (“SA”) operators can utilise a little known VAT scheme on holiday accommodation sales through platforms like Airbnb and Booking.com and maximise VAT efficiency.

In today’s Shipleys VAT brief we look at how SA operators can leverage this vital court ruling and take advantage of VAT efficiencies to maximise profits.

What’s happened?

A recent VAT case has resulted in a positive outcome for Serviced Accommodation (SA) providers and landlords who may use community based online platforms for listing and renting local homes (Airbnb, Booking.com, Expedia).

The case has provide much needed clarity on how Serviced Accommodation (“SA”) operators can utilise a little known VAT scheme on holiday accommodation sales through platforms like Airbnb and Booking.com and maximise VAT efficiency.

As a result, SA operators should consider their current VAT position and whether the case opens the door for VAT Savings or VAT Reclaims.

1. VAT Savings 

The court case has clarified that as a serviced accommodation provider who meets the conditions of the ‘tour operators margin scheme’ (TOMS) can apply VAT on the margin, if the margin is 30%, VAT is only charged on the 30%.  This may results in significant VAT savings or indeed a de-registration (see Margin below), subject to a comparative exercise with the flat rate scheme.

2. VAT Reclaims

Where you are VAT registered and have paid VAT to HMRC, the case allows you to consider making a claim for any overpaid VAT from up to four years ago subject to conditions being met.

3. Margin 

It is important to understand, subject to conditions, only the ‘margin’ counts towards the VAT threshold. On a turnover of £150,000 with a margin of £50,000, there is no requirement to register for VAT or you may consider a de-registration.

The application of TOM’s may directly influence your pricing strategy, stimulate growth and assist with cashflow.

Next steps

Please note that whilst the case provides clarity, one should take advice on the application of the case based on your particular facts and circumstances before taking any action or refraining from any action. HMRC may appeal the case, therefore watch this space and legislation can be changed.

Finally, remember community platforms share data with HMRC, therefore whilst reviewing your VAT strategy it is an opportune time to review your VAT compliance overall.

If you require assistance, or would like to know more please email us on info@shipleysvatsolutions.com

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