VAT on Hotel Rooms, AirBNB 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?

Is there 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

VAT at the standard rate (20%) is charged on holiday lets regardless of the type of accommodation or the length of stay. Accommodation advertised or held out as suitable for holiday or leisure is treated as holiday accommodation and includes the following:

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

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 property lettings

Airbnb is becoming one of the most popular ways to rent out property temporarily. The appeal lies in the variety and uniqueness of accommodations available, as well as the chance for guests to experience local culture more authentically by staying in residential neighbourhoods. 

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.