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Where Taxpayers and Advisers Meet

Complimentary hotel rooms - input VAT issues

AngryVATman
Posts:15
Joined:Wed Aug 08, 2018 11:06 pm
Complimentary hotel rooms - input VAT issues

Postby AngryVATman » Wed Nov 20, 2019 2:35 pm

Different scenario to my previous question but a similar topic:

When a hotel provides rooms free of charge, there is no consideration therefore no output VAT is due.

What about the input VAT position though? Should there be a restriction on the input VAT claimed in relation to provision of these rooms?

For example, if 5% of all a hotel's room nights were complimentary, should 5% of all input VAT be disallowed?

Cheers

les35
Posts:635
Joined:Wed Aug 06, 2008 3:09 pm

Re: Complimentary hotel rooms - input VAT issues

Postby les35 » Wed Nov 20, 2019 4:15 pm

Interesting question.
Where the occupant is an employee, Sch 6. para 10 provides that the supply is nil. But presumably the supply is still in the course of the hotel's business, so input tax remains deductible.
On reflection I think a free supply to a person who is not an employee is also something done in the course of a business. No input tax restriction is required. If the occupant were the proprietor (or a member of his family) then that is private use so it would be non-business. Does SI 1993/1507, art 6(d) provide that there is no VAT charge?

Trevor S
Posts:108
Joined:Tue Jan 01, 2019 12:37 am

Re: Complimentary hotel rooms - input VAT issues

Postby Trevor S » Wed Nov 20, 2019 11:59 pm

Another point to consider ... is the accommodation really free? Could someone just go and spend the night there, and pay nothing at all? The only offers I've seen that sound similar have some form of "catch"! You might be required to pay for meals at the hotel, or you might need to stay for a number of paid nights in order to earn the "free" one. If in practice there is a requirement for the customer to pay something, then from a VAT perspective the amount paid will be the consideration for everything supplied. In which case, no problem with input tax recovery.

A recent case involving M&S reached this conclusion when considering a meal deal comprising three courses and a "free" bottle of wine for a set price. They deemed that the wine was in reality not free, and the amount paid was consideration for all four items.

But if the accommodation is genuinely free, and there is nothing at all that could be regarded as consideration - you may want to consider whether section 3.1 of notice 700/7 applies (regarding gifts of services). If it does, my reading is that an output tax declaration is required if an input tax claim is made.


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