Providing Serviced Residential Accommodation (R2SA) – How do I account for VAT on this activity?

As business models evolve to provide access to serviced accommodation – Airbnb for example – there is a model where a business looks to rent in property owned by third parties and then let it out themselves as serviced accommodation or indeed, holiday lets. The industry refers to it as R2SA – Rent to Serviced Accommodation.

The question is how to deal with the VAT accounting on the letting charges. Three possible options could arise:

• You account for the standard VAT rate (20%) on the letting charges

• You look to access the Flat Rate if your annual turnover is less than £150,000 excluding VAT

• Do you have to use the Tour Operators Margin Scheme (TOMS)?

We understand that the use of the TOMS route – which is mandatory if indeed it does apply – is currently the subject of a challenge from HMRC. TOMS enables VAT only to be accounted for on the profit margin of such qualifying supplies, but HMRC appear to be challenging its use in this R2SA sector on the basis that TOMS only applies where there is “no material alteration” to the supply as it is bought to by the operator to the supply that the operator is making to its own customers.

It will be interesting therefore to hear of the outcome from this Tribunal case once the decision becomes public.

TOMS operation and the Travel sector in general has specific VAT rules to consider as you can see and further changes from the EU in the regard to transport and accommodation provision across the EU look to add further layers to the VAT processes. If you do need specific help, then Andrea Brindley in the VAT team here is on hand to assist – Andrea.Brindley@Xeinadin.com is her contact email.

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