VAT on Hotel Rooms and Holiday Lets

Whether looking at a one-night stay, a weekend break or a longer holiday, the cost of accommodation is an important consideration but is VAT adding 20% to the cost of your stay?

VAT on hotel rooms

VAT at 20% is chargeable on accommodation in a hotel, motel, guesthouse, inn or similar establishment.

A hotel room paid for as part of a package holiday is subject to VAT, but you would not normally see a VAT charge on your invoice, as travel agents use a special scheme which allows them to only account for VAT on their profit margin.

If a guest stays for a continuous period of more than 28 days, VAT is not charged on the part of the payment that is for accommodation (not meals) from day 29.

Where an inclusive price is charged for bed and board, the price must be apportioned fairly to reflect the cost of accommodation and VAT charged on the remainder of the cost.

VAT on holiday lets

Accommodation advertised or held out as suitable for holiday or leisure is treated as holiday accommodation and includes:

• houses
• flats
• chalets
• villas
• beach huts
• tents
• caravans
• houseboats

VAT at the standard rate (20%) is charged on holiday lets regardless of the type of accommodation or the length of stay.

However, holiday accommodation which is let out of season is exempt from VAT if it is let as residential accommodation for more than 28 days and the area clearly has seasonal holiday trade.

VAT on Airbnb lets

Although Airbnb lets are subject to VAT in the same way as any other holiday accommodation, it is common for no VAT to be charged because the owner of the Airbnb does not have sufficient letting income to require VAT registration. VAT registration is only compulsory when turnover exceeds £90,000 in a 12-month period.

Income received by owners who let out a single room in their home or only let out their home for limited periods of time is likely to be below the £90,000 threshold.

As VAT can only be charged if the owner is registered for VAT, no VAT will be charged on holiday accommodation of any type if the owner is not VAT registered.

Do you need help?

VAT can be very complex and often difficult to understand, but it is also one of the most widely paid of all taxes. If you require advice on VAT for hotel rooms and other tourist accommodations, we encourage you to get in touch with our dedicated VAT team, who can offer specialist advice and guidance.