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All change for VAT on hotel deposits

At present if a guest pays a deposit for a room but loses the deposit as a result of cancelling the booking the hotel has been able to reclaim the VAT paid on the deposit on the basis that no supply will now be made to the guest.

The new treatment from 1 March 2019 is that where VAT has been accounted for on an advance payment made by a customer this VAT can no longer be reclaimed if the customer cancels the booking and the hotel retains the deposit. The VAT accounted for can only be reversed to the extent that a refund is made to the customer.

The new treatment also applies to amounts which the customer has contracted to pay on a future date; for example if a customer had agreed to pay £500 for a hotel stay and cancelled at a point which...

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