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Where Taxpayers and Advisers Meet

VAT on service charge and B&B Accommodation

chaudhary2542
Posts:1
Joined:Wed Feb 10, 2021 3:56 pm
VAT on service charge and B&B Accommodation

Postby chaudhary2542 » Wed Feb 10, 2021 4:10 pm

Hi

I need your help on the VAT heath check on our client (the management company).

Our client is running Hotel (accommodation with B&B). Hotel Premises comprise 40 rooms and each room is owned by a sperate individual. As per lease agreements, the management company will advise/sell rooms to the public and provide all hotel services. Income from customer includes room rents, breakfast charges, dinner etc. Only room rental element belongs to room owners and will get distributed to them on a periodic basis. All other income (breakfast, dinner, drinks etc) belong to the management company.

My questions:

Should management company charge VAT on room rental element if this is income will get distributed to room leaseholders on a quarterly basis.
The management company separately will invoice for running expenses to leaseholders as service charge. All leaseholders are resident outside the EU, should the management company include VAT on service charge invoices?

Kind regards

Chaudhary

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

Re: VAT on service charge and B&B Accommodation

Postby les35 » Thu Feb 11, 2021 11:00 am

Without sight of the contractual documents, it is impossible to be precise on this one.
My initial conclusions and starting point for more comprehensive advice is:
1. the leaseholders are each required to be registered for VAT in the UK, under the Place of Supply rule for land-related services; and
2. supplies are taxable not exempt.

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

Re: VAT on service charge and B&B Accommodation

Postby Trevor S » Thu Feb 11, 2021 1:36 pm

In addition to the above, consider how the arrangement appears to the public staying at the hotel? Are they aware of the leaseholders? Are they aware that they are entering into two separate contracts for their stay - one with the leaseholder for the room and the other with your client for meals?

If in reality the public are buying hotel accommodation from a hotel acting in its own name, the hotel might for VAT purposes be seen as both receiving and making supplies of the rooms, rather than acting as the leaseholders' agent.


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