No-Shows – ECJ Rules No Vat Due

Posted: 24th May 2011

A recent decision of the European Court of Justice will come as good news for hard-pressed hoteliers and has led to HM Revenue and Customs issuing new guidance on deposits.

hotel 1
The decision confirms that there is no relationship between a deposit taken and the supply of a standard-rated service. Accordingly, therefore, where a deposit has been taken for a hotel booking and retained because the person making the booking is a ‘no-show’, there is no need to account for VAT on the deposit.
However, if the deposit is made for a specific room which is therefore kept vacant, the supply remains one on which VAT is due.
Hotel owners can reclaim VAT overpaid as a result for the past four years only. In addition, hoteliers will want to consider their terms and conditions to ensure they are VAT efficient.