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VAT blues hit Chelsea apartment owners with £4.5m!

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TLDR:

– Reelreed, the owner of over 200 short-term let apartments in Chelsea, has been hit with a £4.5m VAT bill after HMRC considered the properties to be providing the same service as hotels.
– The company defended itself, claiming that the apartments were self-sufficient and not the same as hotel accommodation.

Reelreed, the owner of over 200 short-term let apartments in Chelsea, has been hit with a £4.5m VAT bill after HMRC considered the properties to be providing the same service as hotels. Originally, HMRC issued assessments of £4.8m for unpaid tax, but this was later reduced to £4,572,415. The apartments in question could all be used similarly to a rental and all had the white goods necessary to be self-sufficient, therefore Reelreed claimed the flats were not the same as hotel accommodation.

However, on the website, the block is advertised as having a maid service, a hairdressing and beauty salon, babysitting/cot hire, a laundry service, and the ability to book theatre tickets for the guests. The First Tier Tribunal (FTT) based its decision on Note 9 of section 31 VATA which states: ‘“Similar establishment” includes premises in which there is provided furnished sleeping accommodation, whether with or without the provision of board or facilities for the preparation of food, which are used by or held out as being suitable for use by visitors or travellers.’

The FTT concluded that Chelsea Cloisters was an establishment similar to a hotel and therefore liable for the VAT payment as it fell within Note 9 that ‘premises where furnished sleeping accommodation is provided which is used by or held out as being suitable for use by visitors or travellers’.

The penalty appeal was also dismissed as Reelreed did not take ‘reasonable care’ when dealing with VAT. The FTT said: ‘There is no evidence of Reelreed ever having taken considered professional advice about its VAT affairs.’ Both the liability and penalty appeals were dismissed.

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