Many business that offer function room hire may not be aware of the recent VAT change, and as a result might not be complying with the VAT requirements and could be undercharging.
(PRWEB UK) 19 February 2013
Prior to 2011, HMRC held the view that function room hire would only be subject to VAT where both the room hire and catering were supplied together. Where the catering was provided by a third party, the supply of the room only by the operator would be exempt from VAT.
In October 2011 HMRC changed its view and published an updated version of Notice 709/3 Hotels and holiday accommodation confirming that all function room hire for catered events would be standard rated, regardless of who supplied the catering. On 22nd January 2013, HMRC issued a further brief confirming this change.
HMRC has confirmed that no action will be taken against those who have not applied VAT to such room hire since October 2011, as they had not issued revised guidance to reflect their change of view. However, with the issue of the brief all businesses must ensure that with effect from 22nd January 2013, VAT at 20% is applied to all room hire for catered events, even where the hire is on a room only basis and the catering is supplied by a third party.
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