Tax risk for rural events

As the peak wedding season gets underway HM Revenue & Customs (HMRC) has started to clamp down on VAT taxable aspects of the letting of land or property for events.

The danger of incurring a tax bill comes if the property or landowner provides any additional services, accountants Saffery Champness warned.

Such services could, for example, include the personal involvement of the property’s owner, the opportunity and permission for photography, car parking, advertising any supplementary services, cleaning and preparation of rooms and use of ancillary rooms and toilets.

Sally Appleton, rural business specialist at Saffery Champness in Harrogate, said: “If any of these elements are present, and in most cases some of them are bound to be, HMRC is likely to say that the whole supply is more than just the letting of a room or rooms and is therefore taxable.

“Where such services really are minimal then there may be grounds for arguing for exemption, but HMRC appears willing to be prepared to spoil the party.”

She added: “At one end of the spectrum the passive letting of land or property, without any further engagement by the owner, should be exempt from VAT.

“Where additional services are provided however then VAT becomes due not just on those services but on the entire amount including the charge for the property let.”

Mrs Appleton warned that HMRC viewed the supply of the venue as part of the supply of a standard rated package of wedding services, and has been successful at the Tax Tribunal on a number of occasions in pursuing this.

She added: “HMRC’s view now appears to be that if any additional elements are present then the concept of ‘passive’ letting is immediately void.

“The warning therefore is that if you let rooms or land for weddings and provide any additional services then everything becomes VAT-able.”