Q: I run a hotel and am VAT registered. I have the usual short stay guests, but also let rooms to individuals for longer stays; in some cases exceeding 28 days. Where stays exceed 28 days, and the occupant is an individual, I only account for VAT on the reduced value, being the element of my service charge in accordance with Section 3 of VAT Public Notice 709/3.

I am now considering moving onto the flat rate scheme for VAT but my concern is that that I will have to account for the flat rate on all of my turnover. Is this correct?



A: In general, you have to account for flat rate VAT on all supplies you make. However, there are certain supplies which are excluded from the flat rate scheme. Schedule 6 Item 9 (2)(a) of the VAT Act 1994 confirms that in relation to the hotel 28 day rule: “the value of so much of the supply as in excess of 4 weeks shall be taken to be reduced to such part thereof as is attributable to facilities other than the right to occupy the accommodation”. This means that for VAT purposes the actual value of the supply is reduced to the supply of the facilities and services (an amount set to at least 20% of the supply). Therefore, for flat rate scheme purposes the turnover for the flat rate calculation will be the reduced value.

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