Rural businesses hiring rooms or land for wedding ceremonies should be aware of a ruling earlier this year about how they should charge VAT.
The owners of Glendorgal Hotel in Newquay, Cornwall, were recently charged £50,000 in unpaid VAT for hiring out a room for wedding ceremonies.
The owners had thought they were exempt from paying VAT under rules governing “passive letting of land”.
Passive letting is when an owner collects income from the use of land where they have not been actively involved.
In the hotel’s case, the tax tribunal found wedding regulations prevented the legal right to exclusive use of a space that had been hired by a customer.
As the room was provided with a right to hold a civil wedding ceremony, this meant there was no simple “passive” letting of land.
“Owners of private properties, including country properties and estates, who let rooms for weddings, or indeed who let any space for ceremonies, should pay close attention to this ruling,” said David McGeachy, partner at Saffery Champness.
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HMRC had argued letting land for wedding ceremonies was a package, said Mr McGeachy.
Landowners would, for example, give support in setting up the venue, recommending caterers, cleaning and car parking, which meant the rental income was no longer passive.
“On the basis of this ruling, where a license to hold such ceremonies has been issued, it is now clear that VAT also needs to be added to the hire cost of these rooms, and that will certainly increase the cost to those hiring the property for such events.”
Farmers should be aware that hiring out a room or land for business purposes was still exempt VAT, added Mr McGeachy.
But any situation where the farmer overwhelmingly provided a service for use of their property, was not exempt.
This included ceremonies and events other than weddings.