Professional self-catering businesses that PASC represents are less profitable than the casual observer might imagine. This is due to the combined effect of VAT and business Rates. The very great bulk of the self-catering sector falls below both the VAT threshold, having only one unit and also falls below the new Business Rates threshold of an RV of £12,000 or less. Therefore, the majority of self-catering holiday accommodation in the UK pay no Business Rates and do not charge VAT.
This creates a vortex of tax for businesses above these thresholds. Bearing in mind that pricing is competitive, and that as like for like properties are let for approximately the same rate the following occurs:
Our guests might imagine that we are getting all the £1200, whereas in fact we are collecting £320 for the Treasury.
The Government has announced a Consultation into two elements of VAT. Firstly a possible cut in Tourism VAT, they would like to restrict this to Northern Ireland, we and other lobbying partners will be arguing for full UK application. Secondly there is a Consultation into the VAT Threshold. These Consultations end on the 5th June 2018, so please let us have any feedback you may have. Detail of all the current Government Consultations that affect self-catering, can be found here