VAT windfall for hotels and conference organisers
VAT WINDFALL FOR HOTELS AND CONFERENCE ORGANISERS
A recent ruling by the European Court of Justice (ECJ) means hotels, conference organisers and other affected businesses in the UK can now reclaim VAT that the ruling determines they have overpaid, as well as improving their VAT position in the future. The ruling applies where a customer pays a deposit, and the deposit is retained when the customer cancels or fails to show up.
BackgroundA French hotel operator appealed the VAT treatment of deposit payments that it retained when respective guests either cancelled, or simply failed to show up, after making a reservation.
The ECJ held that where a customer cancelled or simply did not take up its booking after making a reservation, no supply was made by the hotel to the customer for VAT purposes. This means that where the hotel is able to keep any deposit or advance payment in those circumstances, the hotel does not have to pay any VAT on it, unlike the normal charge for room hire which is subject to VAT at the standard rate.
This does not change the fact that deposits, etc, paid by customers who actually use the room are still subject to VAT in the usual way.
Who is Affected?As well as hotels, the ruling also affects conference and exhibition organisers, operators providing hospitality, and providers of serviced accommodation and holiday accommodation. It applies where any form of deposit, advance payment or late cancellation fee is charged, and is retained because the customer cancels or fails to show up.
Reclaim of Overpaid TaxA reclaim is allowed for VAT that has been overpaid in the past as a result of treating these amounts as subject to VAT. Claims should be made urgently as there is a three-year time limit. Going forward, providers should change their VAT returns procedures to make sure they don’t overpay VAT.
Do I have a Claim?
Please contact us for a no-obligation discussion of your circumstances to find our whether or not you can make a reclaim.
For further information please contact
Bob Neal in our Taxation Services Team at our Nottingham office:
Freeth Cartwright LLP, Cumberland Court, 80 Mount Street, Nottingham NG1 6HH
Tel: 0115 901 5599
Fax: 0115 859 9619
Email: bob.neal@freethcartwright.co.uk
Mike Gilbert in our Taxation Services Team at our Nottingham office:
Freeth Cartwright LLP, Cumberland Court, 80 Mount Street, Nottingham NG1 6HH
Tel: 0115 934 3903
Fax: 0115 859 9619
Email: mike.gilbert@freethcartwright.co.uk
The information contained in this document is a general summary and commentary on recent legal developments and does not constitute advice. You must always take specific legal advice in relation to any of the issues raised in this document in terms of the impact they may have upon any matter in which you are involved.