Does a guest house owner need to register for VAT?
I am sure this is a common query about how to calculate taxable sales for the purposes of VAT registration, but I would welcome readers’ thoughts.
- My client rents out four rooms to temporary visitors in her house; they are fully furnished and equipped with towels, keys, bed linen etc, so we accept that the income is taxable as holiday accommodation or similar.
- Next year, an international sporting event is taking place in the town, which means my client can charge a premium rate for two weeks and take full non-refundable payments in advance to help her cash flow.
- If the advance payments are included with her fees for the last 12 months of actual stays, she will need to register for VAT because the total figure will exceed £90,000. If they can be excluded because the actual booking is not until next year, the problem is averted or at least delayed.
- A colleague has suggested that the solution is to take full payment in advance but offer a 50% cancellation refund if the guest cancels one month before the start of the booking, and then only 50% of the advance payment is included now and this will keep total receipts below £90,000.
My colleague’s suggestion seems sensible, but is it correct?
Query 20,787– Scarbrough Fair.
Offering a FIG leaf?
I have a client who has recently moved to the UK, having always lived abroad. Her father set up a Jersey trust many years ago. He has never lived in the UK and all the other beneficiaries of the trust are not resident here.
The trustees did, however, buy a UK property some years ago and this has been let to tenants. It provides a significant income stream to the trust.
The client wants to ask the trustees if they would help her buy her own home in the UK so there will be a distribution to her from the trust. If it is a capital distribution, will foreign income and gains (FIG) relief apply or is there a problem because of the UK property held in the trust?
Query 20,788– Foreigner.
Missing in action
My client wanted to build a garden room behind his house. He found a builder who was thought to be reputable and paid a substantial amount of money in advance. The builder provided several invoices for labour and building supplies, including amounts for VAT.
The builder began work but then left after only a couple of days leaving things unfinished, walls only partly constructed and the site open to the elements. My client was extremely unhappy, especially when he used the government’s ‘check a UK VAT number’ service and discovered that the response was: ‘This does not match the VAT number of any UK VAT-registered business.’
Am I right in thinking that the amount described as VAT on the invoice is nothing of the sort and is a fraudulent attempt to increase the overall amount that is being charged? Should I or my client tell HMRC of this misuse of a VAT number and can, or should, this be done anonymously? Naturally, my client would like to recover the full amount of payments made to the builder as it appears that there are so many faults in the small amount of work done that it will have to be taken down and construction started afresh. Repayment in full appears unlikely, but on the basis that the VAT charged was not VAT, are readers aware of any method by which that 20% at least might be recovered?
I look forward to replies from Taxation readers.
Query 20,789– Mr Angry.
Cross-border tax treatment of disability benefit – revisited
On 11 June 2026, Taxation kindly published query 20,720 about the tax treatment of a state disability benefit (UWV WIA-IVA) being received by one of our clients who is moving from the Netherlands to the UK. Since publication, four points have become clearer.
First, the Dutch Tax Administration’s January 2026 non-resident treaty table expressly places this state disability benefit for UK residents under Art 20, not Art 17. Does this now substantially resolve the treaty-classification question in favour of Art 20, giving sole taxing rights to the UK and avoiding any Art 17 subject-to-tax clawback?
Second, our client’s pre-incapacity gross monthly remuneration was about €17,000 including holiday pay; her IVA is now approximately €5,050 gross including holiday pay. Although IVA is formally earnings-linked, does a cap reducing the benefit to roughly one-third of her former remuneration weaken that characterisation? Her award under Art 4 of the Wet WIA (Labour Capacity Act) is final, non-means-tested and for full and durable incapacity, with no expected recovery or reintegration. Is IVA therefore closer to taxable employment and support allowance in table A or to exempt severe disablement allowance in table B?
Third, as ITEPA 2003, s 681(1) permits exemption ‘to the extent’ that a corresponding UK benefit has an exempt element, could a partial exemption apply?
Fourth, one reply suggested we could establish the Dutch legal nature of IVA, then seek HMRC non-statutory clearance. Our client now has the final UWV decision, the relevant Wet WIA provisions and official Dutch Art 20 guidance. So is the remaining issue the UK table A/table B classification; what route, if any, would be most appropriate to obtain certainty on that classification?
We would appreciate any further clarification on these additional matters.
Query 20,790– Amsterdam Tulip.
