Commentary

BB/15A/06 VAT—the reduced value rule for long-stay guests in hotels—revised interpretation of the law on VAT treatment

Part V16 Forms and other HMRC material

BB/15A/06 VAT—the reduced value rule for long-stay guests in hotels—revised interpretation of the law on VAT treatment

BB/15A/06 VAT—the reduced value rule for long-stay guests in hotels—revised interpretation of the law on VAT treatment

Business Brief, Issue 15. 27 September 2006

This Business Brief article announces a change in HM Revenue & Customs' (HMRC) interpretation of the law regarding the application of the reduced value rule for long-stay guests in hotels. This change has been incorporated in an update to VAT Notice 709/3 “Hotels and Holiday Accommodation” (Part V8), issued recently.

The change affects the treatment of supplies of overnight accommodation made by hotels (which includes inns, boarding houses and similar establishments), where the accommodation is provided to individuals for periods exceeding 28 days. Stays of up to and including 28 days are unaffected by the change and will continue to be subject to VAT at the standard rate.

Background

Many people, for a variety of reasons, “live” in hotels or similar establishments for long periods. As the exemption from VAT for supplies of residential accommodation (for example in houses

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