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VAT on Holiday Lets

Do I have to pay VAT on my holiday let?

Whilst residential rental properties are exempt from VAT, holiday lets are not. This is because, from a VAT perspective, residential lets are viewed as an investment, whilst a holiday let is comparable to a trade and therefore follows the same VAT treatment as a hotel, caravan park or B&B.

So, if you are letting your property for holidays and the income exceeds the VAT registration threshold of £85,000 (correct in June 2023), that income will be subject to standard rated VAT (currently 20%).

What accommodation is considered a holiday let?

Holiday lets include (but are not restricted to) any of the following which are advertised as suitable for holidays or for leisure use:

• house/ flat
• cottage
• chalet/lodge
• villa
• beach hut
• tent
• pod
• caravan/static caravan
• houseboat

If your holiday let is connected to another business which is already registered for VAT, a farm business for example, the holiday let income and any income from the connected business will be treated as the same source of income, not separate sources, and the combined income will be subject to VAT at the standard rate.

When should I declare VAT on my holiday let?

Generally, for VAT purposes, holiday rental income becomes taxable at whichever occurs first; the date of receipt of payment or the time of supply.

Usually, visitors would pay a deposit to secure the holiday let, with the balance being paid shortly before their stay. For VAT purposes, the receipt of the deposit and the receipt of the balancing payment represent two separate supplies. Therefore, VAT should be declared on each payment on the date they were received, rather than on the total amount when the rental takes place.

Similarly, when looking at whether the VAT registration threshold has been reached, it is the date and value of payment that are relevant (if paid before the accommodation is provided), not the date visitors stay.

We hope that you’ve found this article helpful. For further advice regarding VAT on holiday lets, please get in touch with our specialist team, we would be happy to help.

Find out more about our specialist accountancy services for property and landlords.

Here are some more resources that you might find useful;

Tax on Holiday Lets

Tax Relief for Landlords