If you run a hotel or venue that is licensed for weddings it’s worth checking your VAT position. At least one hotelier
has been landed with a bill of more than £50,000 for unpaid VAT and many more could soon be under the HMRC microscope.
Given HMRC’s success in winning a tribunal against the owners of the Glendorgal hotel in Newquay, Cornwall (Blue Chip Hotels) it is very likely that they will undertake further audits to determine how wedding venues account for VAT.
HMRC assessed the company for over £50,000 of underpaid VAT relating to the hire of the hotel’s Tamarisk Room, which was licensed to host civil wedding ceremonies. The hotel had tried to argue that the hire of the Tamarisk room was a VAT exempt supply of land, regardless of the other services it provided the wedding party.
HMRC argued that VAT should have been charged on the Tamarisk room hire charge as the hotel was also used to host the wedding reception.
The Tax Tribunal agreed with HMRC that the hire of the room was subject to VAT at the standard rate of 20 percent, but for a different reason than that argued by HMRC. As a result, the company will now have to pay HMRC’s assessment.
The Tax Tribunal found that when a room is hired as part of a wedding package, a single VAT-able supply is being provided. While this broadly supports HMRC’s current policy, the Tax Tribunal went further and suggested that the provision of licensed premises in which a civil wedding could legally be carried out should not be considered a VAT exempt “passive letting of land”, a point that HMRC has accepted until now. As a wedding licence must afford the general public access to a wedding ceremony, the wedding couple could not have the “exclusive” use of the room required to exempt the supply from VAT. The hire of the room for the ceremony was therefore a separate supply, subject to VAT.
VAT is a complex tax to apply and as such HMRC are always quick to challenge any application that they identify as being unusual or incorrect. Whether you run a wedding venue or another type of business it’s worth taking expert advice to keep your VAT position under review. We can help you ensure you apply the regulations correctly and stay out of the HMRC spotlight. We might also be able to identify areas where you are overpaying and help you save money. Get in touch today for a free initial consultation.
If you’d like to read more VAT themed blogs take a look here.
