HMRC VAT Notice 709/3: Holiday Accommodation VAT Standard Rate After Reduced Rate Ends

• The temporary reduced VAT rate for tourism and hospitality concluded on March 31, 2022.
• From April 1, 2022, all supplies in the UK hospitality and holiday accommodation sectors are subject to the standard VAT rate.
• HMRC VAT Notice 709/3 provides comprehensive guidance on VAT for hotels, holiday accommodation, caravans, and camping facilities.
• The reduced rate, active from July 15, 2020, was legislated under Section 29A of the VAT Act 1994.
• Businesses must now ensure their pricing and accounting practices reflect the return to the UK hospitality VAT standard rate.

Legal professionals advising clients in the UK hospitality and holiday accommodation sectors must ensure their clients are fully aware that the temporary reduced VAT rate ended on 31 March 2022, and all supplies made from 1 April 2022 onwards must apply the standard VAT rate, as detailed in HMRC VAT Notice 709/3.

The temporary reduced VAT rate, which provided significant relief to the tourism and hospitality sectors, concluded on March 31, 2022. This measure, initially introduced on July 15, 2020, saw a reduced VAT rate applied to various supplies within these industries. Following its expiration, all supplies made from April 1, 2022, onwards are now subject to the standard VAT rate, marking a return to pre-pandemic tax regulations. This critical change is detailed within HMRC VAT Notice 709/3, which serves as the primary guidance for businesses operating in the holiday accommodation and wider hospitality sectors.

Throughout its duration, the temporary reduced rate underwent several adjustments and extensions. Initially set at 5%, this beneficial rate was extended multiple times by the government, including a period from January 12 to March 31, 2021. Consequently, HMRC has updated its guidance, removing all information related to calculating the reduced VAT value, as the temporary VAT reduced rate tourism end has rendered those instructions obsolete. Businesses, particularly those involved in holiday accommodation, caravans, and camping facilities, must ensure their accounting practices reflect this shift to the UK hospitality VAT standard rate.

The legal framework underpinning the temporary VAT reduction was rooted in Section 29A of the VAT Act 1994. This section designates specific goods and services as eligible for reduced rates, as further detailed in Schedule 7A of the Act. The Value Added Tax (Reduced Rate) (Hospitality and Tourism) (Coronavirus) Order 2020 was the specific instrument that brought these changes into effect, adding Group 15 to Schedule 7A. This group outlined the precise supplies that qualified for the new rate, particularly those related to the grant of a license to occupy holiday accommodation, which would otherwise not be exempt under Schedule 9, Item 1 (Land).

From July 15, 2020, until March 31, 2022, establishments such as hotels, inns, boarding houses, and similar entities benefited from this temporary reduced rate for their qualifying supplies. The scope of this legislation was broad, encompassing not only traditional hotel stays but also various forms of holiday accommodation, including caravans and camping facilities. Understanding the precise legislative context is crucial for businesses to have correctly applied the reduced rate during its validity period and to now accurately implement the standard rate.

HMRC VAT Notice 709/3 provides extensive guidance for businesses involved in the provision of hotels and holiday accommodation. The notice systematically addresses various aspects of VAT treatment across different types of establishments and services. Sections 2 through 4, for instance, are dedicated to explaining how supplies made by hotels, inns, boarding houses, and similar establishments should be treated for VAT purposes. This includes specific provisions for furnished sleeping accommodation for long-stay guests, detailed in section 3, and other services such as conference facilities and wedding packages, covered in section 4.

Furthermore, sections 5 and 6 of the guidance specifically address the VAT treatment of holiday accommodation, encompassing caravans and camping facilities. The notice also delves into the complexities of deposits, cancellations, and other charges associated with hotel and holiday accommodation supplies in section 7. This particular section saw amendments following the 2018 Budget, which introduced measures concerning 'unfulfilled supplies,' impacting how deposits and prepayments are handled. All businesses operating in this sector, from large hotel chains to small caravan parks, rely on this comprehensive document for their VAT compliance.

The cessation of the temporary reduced VAT rate and the reinstatement of the UK hospitality VAT standard rate from April 1, 2022, carries significant implications for all businesses within the sector. Legal professionals advising clients in the UK hospitality and holiday accommodation sectors must ensure their clients are fully aware that the temporary reduced VAT rate ended on 31 March 2022, and all supplies made from 1 April 2022 onwards must apply the standard VAT rate, as detailed in HMRC VAT Notice 709/3. This shift necessitates a thorough review of pricing structures, accounting systems, and invoicing procedures to ensure full compliance with current VAT regulations.

The detailed guidance provided in HMRC VAT Notice 709/3 hotels and holiday accommodation sections remains vital for understanding ongoing obligations. Businesses must accurately determine when to pay VAT for holiday accommodation, caravans, and camping facilities, adhering strictly to the standard rate. The period from July 15, 2020, to March 31, 2022, was a unique exception, and the return to normal VAT rules requires diligent attention to avoid potential penalties. This makes the accurate application of the standard rate a critical operational and legal concern for the entire industry.

Lawyers advising clients in the UK hospitality and holiday accommodation sectors must ensure their clients are aware that the temporary reduced VAT rate ended on 31 March 2022, and all supplies made from 1 April 2022 onwards must apply the standard VAT rate, as detailed in HMRC VAT Notice 709/3.

Source: Original reporting via GOV.UK guidance