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VAT on holiday accommodation

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I used to think that all accountants were sleazy, blood sucking leeches. After 6 months’ worth of interaction with Irfan, I no longer believe this to be the case. It is a pleasure to have someone who genuinely has your own interest at heart. Irfan is honest, hardworking and punctual. all that you can ask for in an accountant. dare I say it…. even a friend!

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I found Irfan online after having a very negative experience with my first accountant and a distant and confusing one with the second. Irfan is easy to communicate with, quick to respond, professional and knowledgeable. He has taken the time and care to help me understand what I need to do and how best to do it in relation to my limited companies, VAT and self-assessment. I would highly recommend Irfan’s services.

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Irfan has handled my business for two years now. As someone who has difficulty remembering his own birthday, I needed someone who would make sure that all of my accounts were settled in time with HMRC and Companies House deadlines. Irfan has been relentless in ensuring I wasn’t late for important submission dates and for handling our payroll like clockwork. He has been an amazing resource and I would recommend anyone to hire him – especially if you’re just starting out and need someone reliable you can trust.

" Marc Quinn (Director) " - Powerlights Incorporated Limited

As someone who had newly formed his own start up, the most important thing for me was to find someone that could show me the ropes from an accounting standpoint, and low and behold Irfan was that guy. Irfan has been my accountant over the past 3 years and as a Client I could not be happier. Even though I tend to bombard him with questions and queries about letters/information I received from HMRC and companies house, he NEVER failed to get back to me and answer them in a timely manner. When it comes to finding solutions to accounting issues or coming up with the best personalized strategy to overcome paying more tax than I needed to, he delivered the goods. Dependable, reliable, patient and flexible are just some of the words I would use describe him. Thank you Irfan for all you have done…

"lan Michaels " - Locum Pod Limited (Podiatric Medicine)

Over the time we have worked with Irfan he has become a real asset to our company. With his help and guidance, he has looked after the company’s finances and advised us about how we can improve the company in specific areas and cut back in others. It has allowed us to understand our company in more detail and to get on with what we need to do to grow as a company, without worrying about all the financial issues which entail with running a business. His advice, understanding and professionalism is fantastic. Long may our working relationship continue.

James Hillman (Director & Fashion Designer) - James Hillman Limited

Since our company has starting working with Irfan, he has been a great asset for us. His services has been impeccable and his very approachable, proactive and efficient. He supports us with our bookkeeping, VAT, PAYE and corporate taxes. Hudson & McCullum has saved us lots of money on our taxes.

Karen Enoe (Director) - A.I.M.S Support Services Limited

Irfan is professional that goes beyond his mission and tasks. He honestly has tried first to understand me and my business. He has been flexible and devoted time with a high generosity. He has been able to adapt to my schedule and needs during the full year. Always open to serve and render his great expertise and knowledge. He is an expert accountant and is, at the same time, a great individual. I feel in the best hands. Always proactive and ready to support and teach. I a learning new accountancy concepts thanks to his patience. I am very thankful to have Irfan as a trusted partner in the U.K.

" Carolina Caparrós Alvarez (Director) " - Talento Direct Limited

Newsletter issue - October 2018.

Letting of residential accommodation is generally an exempt supply for VAT purposes. However this exemption does not apply to holiday accommodation (includes furnished and non-furnished holiday lettings. The definition of 'holiday accommodation' for these purposes includes property that is advertised or held out as holiday accommodation and those consider suitable for holiday or leisure use. It is not restricted to periods of letting or availability.

Supplies of holiday accommodation are therefore taxable supplies and should be standard-rated, which means that if the rental income goes above the VAT registration threshold (currently £85,000 per year), the landlord will have to register for VAT and collect VAT from the tenants.

Care is needed when applying the rules as there are exceptions - for example, for longer stays. A UK property let to visitors under an Airbnb (or similar) arrangement should generally qualify as holiday accommodation, but care should be taken.

Registering for VAT

VAT applies once the property provider has VAT registered, which is compulsory where their taxable turnover for 12 months exceeds the current £85,000 threshold.

There are separate rules for 'non-established' providers of VATable supplies (i.e. providers based outside the UK), where a zero registration threshold applies. Those in such a position will need to consider their obligations and responsibilities carefully.

Voluntary registration

It is possible to voluntarily register for VAT before reaching the turnover threshold. This may be beneficial to those seeking to recover VAT. However, the cost-benefit analysis of price increases should be measured against VAT recovery potential before making a voluntary registration application. By not charging VAT, the property provider has a competitive advantage over hotel chains, but in the case of well situated city properties, adding VAT may not be overly disadvantageous for bookings.

VAT registration applies to the provider, i.e. the owner of the property. In the case of an individual, this VAT registration will render not just their property income, but all potentially taxable income subject to VAT, which could be onerous. By the same token, all such personal income counts towards the VAT registration threshold, so starting to let out a property could tip an individual over the VAT registration threshold.

For larger Airbnb type operations, involving multiple properties, it may be preferable (for VAT) to own the properties in a separate entity such as a company or even a partnership. Multiple tax and legal considerations apply to transferring property ownership, but for VAT registration purposes at least, a partnership route might be a more viable option than transferring the properties to a separate corporate entity.

A simple decision to generate additional income from an existing asset may not always be the straightforward option it appears. Sensible up-front structuring and advice can mitigate potential downsides.