Are you applying the correct rate of VAT for long-term hotel stays? In this article, we share more on the rules regarding long-term hotel stays from a VAT perspective, what constitutes as long-term accommodation and how our advisers can support you.   

What is the VAT rate on long-term accommodation?

There is a long established 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. 

Note that if the above applies, the entire charge is still taxable, which means that the issue of partial exemption does not arise. We have come across cases where HMRC has treated 80% as exempt from VAT, which isn’t correct and should be challenged. 

What happened to the temporary reduced rate?

The temporary reduced rate was introduced to help the hospitality sector temporarily during the pandemic, due to lockdowns causing forced closures and businesses suffering financially. This was then withdrawn on 1 April 2022. 

What counts as long-term accommodation for VAT?

The dividing line between residential accommodation and hotels can be quite thin, and there have been a number of recent tribunals where accommodation was ruled to be similar to a hotel with VAT due. If a business has any doubts, we advise that professional advice is obtained.  

How Gerald Edelman can help

Our VAT team has extensive experience in this area, whether that is VAT compliance, dealing with HMRC or advice on the correct VAT liability to apply to charges for accommodation.   

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