Eastleigh: RSM warns about wedding venue tax risks

RSM, the Eastleigh-based accountancy firm, has warned hotels and other venues licensed to host weddings to check their tax position in respect of receptions, after a recent Tribunal decision has left one hotelier with a bill of more than £50,000 for unpaid VAT.

The case was brought by the owners of the Glendorgal Hotel in Newquay, Cornwall, one of the Blue Chip Hotels. HMRC assessed the company for over £50,000 of underpaid VAT relating to the hire of the hotel’s Tamarisk Room, which was licensed to host civil wedding ceremonies.  HMRC argued that VAT should have been charged on the Tamarisk room hire charge if the hotel was also used to host the wedding reception. The Tax Tribunal agreed with HMRC that the hire of the room was subject to VAT at the standard rate of 20%.

The tribunal made this judgment, however, for a different reason than that argued by HMRC. Its view was that as a wedding licence must afford the general public access to a wedding ceremony, the wedding couple could not have the “exclusive” use of the room required to exempt the supply from VAT. The hire of the room for the ceremony was therefore a separate supply, subject to VAT.  

Philip Munn, a VAT partner at RSM in Southampton, said: “Organising a wedding is incredibly expensive and this decision will mean that engaged couples will now be much less likely to be able to hire a licensed wedding venue that doesn’t charge VAT. 

“There is also a real danger that hotels could find themselves coming under HMRC’s microscope. There are more than 80 hotels offering licensed wedding facilities across Hampshire alone who are now at risk of being audited by HMRC to determine how they account for VAT.  We’ve also recently seen an increasing willingness by HMRC to challenge or restrict VAT recovery on refurbishment of hotels correctly treating income as VAT exempt.”