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  • Holiday Lets

    VAT on holiday lets

    Hi,

    I am trying to understand the VAT on holiday lets.

    If turnover is above £85000 vat applies at 20%?

    So if my turnover is £85001 it now means I have to charge vat on the lot.ie 20% of £85001 is £17000.02.

    It will obviously make your price less competitive.I assume investors must go to great lengths not to exceed the limit which would limit the size of your holiday let business.I would like to find some worked examples of how the vat is calculated.

    Remember by exceeding the limit by £1 I end up with a vat bill of £17000 or is it calculated on a marginal basis ie for anything over and above £85000?

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    Hi Bill,

    ​You are correct that standard rate VAT is chargeable on holiday lets over £83K revenue.

    However, if you are running an operation of that scale it is likely that you are using professional services which are already charging VAT so you can offset against that.

    Further information here:

    VAT applicable to Serviced Accommodation?

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    The problem with VAT is its a Tax

    you can claim some of the money back but in general you will pay more Tax

    Its a cap on a business in real terms

    Try and stay away from it if you can a great deal of work with VAT returns

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Hi Bill

    You are correct the VAT threshold at the 1 April 2017 became £85,000.

    You are required to register for VAT when you know you are reaching £85,000.  You will only start paying 20% VAT after you have reached the £85,000 threshold.   So you do not need to pay £17,000 as soon as you reach £85,000.

    If you are currently a sole trader and you are reaching the threshold, there are options available to you, but the easiest is to keep your income below £85,000.

    In terms of reclaiming VAT not all costs are Vatable so you will need to know what costs are acceptable or pass the job to an accountant/bookkeeper.

    Many thanks


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    Wayne Ashcroft

    Accountant | Wayne Ashcroft Limited


    Hi Bill,

    Furnished Holiday Lets are classified as a trade, and the income is standard rated for VAT purposes.  If you exceed the VAT threshold – currently £85,000 – then you must register for VAT.  Once you exceed the threshold, it is subsequent invoices which then have VAT added on. 

    Of course, there may be various expenses you incur which include input VAT, and so there are potential claims here to offset.  In addition, there may be scope to claim for VAT on expenses prior to registration, although there are specific time limits and rules to adhere to here.

    Do feel free to contact us for any further assistance but hope this helps for now.

    Best wishes,

    RITA4Rent

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    RITA4Rent (Rental Income Tax Advisors)

    Specialists in Landlord Taxation

    Recommended tax advisors of the Residential Landlords Association

    Follow us on Twitter @Rita4Rent

    clients (at) rita4rent (dot) co (dot) uk

    http://www.rita4rent.co.uk