Published on: 04 August 2020
Last month, British Marine secured a welcome win for the holiday hire boat sector as HMRC confirmed that the temporary reduction to 5% for holiday accommodation does apply to those hiring out boats (inland and coastal) which are to be used for holiday accommodation.
HMRC published official confirmation in VAT Notice 709/3, specifically under section 5.1, which says:
“The hire of a boat will qualify for the temporary reduced rate provided that it is suitable for holiday accommodation and is being held out in this way. Boats being hired for a day to enjoy the activity of sailing for example will not qualify for the temporary reduced rate as they are not being used for holiday accommodation."
Following further discussions, HMRC have provided British Marine with further guidance, covering the following sectors within the industry.
Where hire operators do not own the holiday boat but charge a management fee to the boat owner for their services (such as guest booking, cleaning, boat maintenance etc), HMRC can confirm that the management fee is standard rated. The temporary reduced rate was designed to enable providers of holiday accommodation to reduce their prices if they wished by reducing the VAT burden, whilst still allowing them to recover in full the VAT they have incurred on their own costs.
- Timeshare & Syndicate Boats
As above, the boat owners can apply the reduced rate on the fee they charge for using the boat as holiday accommodation. Management fees charged by the timeshare boat operators however do not fall within the reduced rate and must be charged at the standard rate of VAT.
Mooring fees are covered by the reduced rate to the extent that they are linked to supplies that qualify for the reduced rate; namely, supplies of boats to be used as holiday accommodation that are advertised or held out as such. In such cases VAT should be charged to the customer at the reduced rate of 5%.
Otherwise they would fall to be exempt (residential moorings) or standard rated (other moorings).
For example, if a mooring is only being used for a couple of hours, we would not see this as linked to a supply of holiday accommodation and therefore this would be standard rated.
For ease of reference, the relevant parts of the Value Added Tax (Reduced Rate) (Hospitality and Tourism) (Coronavirus) Order 2020 are below. The legislation for the new reduced rate also cross refers to existing legislation in the VAT Act 1994.
The Value Added Tax (Reduced Rate) (Hospitality and Tourism) (Coronavirus) Order 2020
GROUP 15 - HOLIDAY ACCOMMODATION ETC
Item No 1
Any supply which, because it falls within paragraph (d), (e) so far as the supply consists of the grant of a licence to occupy holiday accommodation([1]), (f) or (g) of Item 1 in Group 1 (Land) of Schedule 9([2]), is not an exempt supply by virtue of that Item.
Value Added Tax Act 1994, Schedule 9, Group 1, Item 1;
(d) the provision in an hotel, inn, boarding house or similar establishment of sleeping accommodation or of accommodation in rooms which are provided in conjunction with sleeping accommodation or for the purpose of a supply of catering;
(e) the grant of any interest in, right over or licence to occupy holiday accommodation;
(f) the provision of seasonal pitches for caravans, and the grant of facilities at caravan parks to persons for whom such pitches are provided;
(g) the provision of pitches for tents or of camping facilities;
In order to qualify for the reduced rate, the provision of a supply must fall within one of the categories above. Whilst HMRC can appreciate the logic of viewing certain moorings for holiday boats as analogous to pitch fees for caravans, for the purposes of VAT law this is not the case. The UK is currently bound by the constraints of the Principle EU VAT Directive and the accompanying CJEU case law. Any VAT legislation the UK Government creates must accord with EU law and be interpreted in line with it.
In a 2019 CJEU judgment (Case C 715/18,) it was established that, for the purposes of the VAT Directive, pitches for caravans and moorings for boats are not equivalent. Moorings for boats are considered to be more akin to parking for a vehicle. Parking for a vehicle is not covered by the new reduced rate legislation. Therefore, if you simply provide a mooring for someone who turns up in (or books in advance for) their own boat or a boat hired from a third party, then this remains standard rated.
In effect, this is more analogous to someone who turns up at a campsite in a motorhome or campervan. Whilst seasonal pitches for caravans are included in the new legislation (see (f) above), motorhomes and campervans (or any equivalent) are not included as they are motorised vehicles. For VAT purposes, the term ‘caravan’ includes mobile homes, park homes, touring caravans and static caravans as per section 6.2. of VAT Notice 709/3. Therefore, pitch fees for motorhomes or campervans remain standard rated, like mooring fees.
The new legislation also includes a “licence to occupy holiday accommodation” (see (e) above). This means that, if you are providing the boat itself for holiday purposes (not just the mooring for someone else’s boat), then you are providing holiday accommodation, and the supply is reduced rated. If, as part of that supply of holiday accommodation, you provide moorings along with the boat, HMRC would consider the mooring to be sufficiently linked to the provision of holiday accommodation to be part of that supply. Therefore, in this scenario, the mooring fee is also covered by the reduced rate.