Revenue & Customs Brief 02/13

VAT liability of rooms provided in hotels or similar establishments with catering

This brief confirms HM Revenue & Customs' (HMRC's) view of the VAT treatment of rooms provided in hotels and similar establishments for the purpose of supplies of catering. It is issued following the review and publication of Notice 709/3 Hotels and holiday accommodation.

Readership

Anyone who provides rooms in hotels or similar establishments for the purpose of supplies of catering.

Action

Information only to ensure that all those affected are aware of HMRC’s change of interpretation.

Background

Supplies of land are normally exempt from VAT. However, this exemption does not apply to the provision of accommodation in hotels, inns, boarding houses and similar establishments, including accommodation in rooms provided for the purpose of supplies of catering, such as rooms provided by hotels for wedding receptions.

Normally, hotels (and similar establishments) supply both the venue and the catering. However, in some instances the catering may be supplied by third parties. When the previous version of the guidance was written, HMRC's view was that, where both the room and the catering were supplied by the hotel or similar establishment, the whole supply (including the provision of the room) would be standard rated. However, where the catering was supplied by a different person, the supply of the room only by the hotel would be exempt (unless the supplier had opted to tax). HMRC subsequently changed its view on this point, but did not update its guidance to reflect this.

HMRC's interpretation of the law

HMRC published an updated version of Notice 709/3 Hotels and holiday accommodation in October 2011. Paragraph 4.1 of the updated Notice confirms that the provision of accommodation in an hotel, inn, boarding house or similar establishment for the purpose of catering is standard rated regardless of whether the catering is provided by the operator of the hotel, etc, or by another person.

What this change means

Where businesses have treated supplies as exempt from VAT in the past no assessments will be issued or action taken to correct the treatment of such supplies. All supplies should, however, be treated consistently with HMRC's revised interpretation from the date of this Revenue and Customs Brief.

Further guidance

Notice 709/3 Hotels and holiday accommodation is available from HMRC's website.

Issued 22 January 2013