A limited company owns multiple holiday cottages and they are applying the temporary reduced rate to this income from 15th July 2020 to 12th January 2021.
They also own several narrow boats, camper vans and motorhomes for which there has been increased demand this year due to Coronavirus and travel restrictions enforcing quarantine for many Brits abroad.
Here, we explore whether or not the reduced VAT rate can be applied to the rental income received from narrow boats, camper vans and motorhomes?
From 15th July 2020 a temporary reduced rate was introduced for supplies of holiday accommodation up until 12th January 2021. Holiday accommodation includes:
- any house
- flat
- chalet
- villa
- beach hut
- tent
- caravan
- houseboat
This list is not exhaustive.
HMRC had initially appeared to exclude accommodation in motor homes and narrowboats altogether from the temporary reduced rate, referring to them as means of transport rather than holiday accommodation. However, following a challenge by British Marine, HMRC quickly updated their guidance to allow the temporary reduced rate for boats held out as holiday accommodation.
So, what are HMRC now advising?
HMRC have said that the hire of a boat can qualify for the temporary reduced rate, so long as it is suitable for holiday accommodation and is being held out for use as holiday accommodation. A boat that is hired out for a day for someone to enjoy the activity of sailing will not qualify for the temporary reduced rate.
The same principal applies to the hire of motorhomes and camper vans – where the hire is held out as holiday accommodation, the hire charge can be reduced rated. The reduced rate however would not apply to the outright sale of a motorhome.
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Reproduced from Croner Taxwise