VAT on long term hotel stays

Are you applying the correct rate of VAT for long-term hotel stays?

Many will be aware of the temporary reduction of VAT from the standard rate to the reduced rate, currently 5%, for certain supplies made in the hospitality sector. This includes hot food, hot drink, and hotel accommodation.

There is also an existing rule that allows long stay accommodation to attract VAT at an effective rate of 4%. This applies from the 29th day of any continuous stay in a hotel and is effectively a reduced value calculation.

What has not been publicised is the fact that the rate of VAT in respect of long-term accommodation is also affected by the temporary reduction of VAT. This means that rather than applying 4%, a notional VAT rate of 1% should apply to long-term hotel stays. This will be effective during the period 15 July 2020 until 31 March 2021.

If you have any questions regarding VAT and what rates you should apply, contact Richard Staunton. Alternatively, you can learn more about our VAT services.