The default position for supplies of land and property is that such supplies are exempt, with some notable exceptions. One such exception to this rule is the provision of holiday accommodation, which is standard rated.
Generally, holiday homes are dwellings whose use throughout the year or as a principal private residence is restricted. This might include holiday chalets and sites for holiday chalets, caravans, huts and house boats, or any other accommodation which is suitable for holiday or leisure use.
In some cases, private residential accommodation might be utilised for holiday accommodation, which can mean an exempt property might be used to make taxable supplies. However, it is generally less likely that taxable holiday accommodation will be used for exempt residential purposes.
Where a residential property is used for mixed purposes throughout the year, i.e. part residential and part holiday accommodation, the VAT liability of supplies must be determined based on the facts as they apply in each case. Factors such as how and where the property is advertised together with the duration of lets and turnover of tenants will need to be considered when reaching a decision on VAT liability.
Where VAT taxable turnover received from holiday accommodation in any 12 month period exceeds the VAT registration threshold, currently £85,000, then the business will be required to register for VAT. All future income received from holiday letting will be subject to VAT at the standard rate, though residential letting income will remain exempt, meaning the business may be required to carry out partial exemption calculations to apportion VAT incurred on costs.
As VAT is a specialised area of tax, where you breach the registration threshold and are unsure what to do, please contact French Duncan VAT Partner Maria McConnell.
This blog is the fifth in a series - you can see the first four blogs here:
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