HMRC Confirms its Position on ‘Rooms Hired for Catering’ for VAT Purposes

HMRC have issued Business Brief 02/13 confirming its policy on the hire of rooms in hotels and similar establishments for catered events.  HMRC considers that VAT now applies to function room hire for catered events provided on a room only basis (ie even where catering is provided by a third party).


This change is likely to affect businesses that let rooms, or space for parties, weddings and corporate events.  Room hire charges will now be subject to VAT at 20% even if the property is not subject to an option to tax.  Businesses will need to consider the commercial impact of this change, as many hirers will not be in a position to recover the additional VAT.

The changes take effect from 22 January 2013, so it is important for affected businesses to review their bookings and check that the correct VAT liability is being applied to supplies after this date.

This change in policy will not affect deposits and pre-payments taken prior to the change, but VAT will become due on the balance of payments made after this date.

HMRC contend that this treatment is consistent with Public Notice 709/3 Hotels and Holiday Accommodation issued in October 2011.  However, they confirm that action will not be taken on businesses that have not applied this treatment before 22 January 2013

If you would like to discuss how this change will affect your business, or how to account for the change in policy, please do not hesitate to contact our VAT expert, Gemma Gower, email, or call 0151 255 2300.

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