Property types and scenarios

VAT on Holiday Lets and Serviced Apartments

PropertyVAT Team · Updated 21 October 2026 · 3 min read

Short-let accommodation sits awkwardly between two regimes. Residential letting is exempt; hotel accommodation is standard-rated. Holiday lets and serviced apartments fall on the taxable side more often than owners expect.

Holiday accommodation

The provision of holiday accommodation is generally standard-rated, as a specific exclusion from the exemption for supplies of land.

So a holiday cottage business, a holiday park, or a coastal apartment let to visitors is typically making taxable supplies — not exempt ones.

Two consequences follow, and the first is usually good news.

Recovery is generally available. Making taxable supplies means input tax on the property, furnishings, maintenance and professional costs is generally recoverable. Compare that with a residential landlord making exempt supplies, who recovers nothing.

Registration may be required. Taxable supplies count towards the registration threshold. An owner who assumed their income was exempt letting may have a registration liability they have not identified — and the longer that runs, the worse it gets.

Serviced apartments: the boundary case

This is where the analysis genuinely bites, because serviced apartments can look like either regime.

The treatment turns on what is actually supplied, not on what the building is called or how it was marketed.

An operator running nightly-rate apartments with daily housekeeping is in a different position from one letting the same units on six-month agreements, even in the same building.

Where a business does both — short lets in summer, longer lets in winter — it may be making both taxable and exempt supplies, which makes it partly exempt and brings apportionment into recovery.

Why this matters on acquisition

If you are buying a holiday or serviced apartment business:

Your own supplies may be taxable, which generally supports recovery on the purchase and may mean you do not need an option to tax to recover.

A trading business may transfer, so TOGC treatment may be available — bookings, staff, goodwill and systems alongside the property.

The seller's VAT position needs checking in the usual way: have they opted to tax, and is the building new.

The income mix matters. Establish what proportion of income is short-stay versus longer-term, because it determines whether you are fully taxable or partly exempt.

The planning and licensing overlap

Short-let regulation has been changing across the UK, with registration and licensing schemes in various jurisdictions and restrictions in some areas.

That is not a VAT question, but it bears on VAT indirectly: a change in how a property can be let may change the supplies being made, and therefore the VAT treatment and recovery position.

If your business model may have to shift from short lets to longer tenancies, model the VAT consequence of that shift before you buy, not after.

What to establish

1. What exactly is being supplied — accommodation with services, or a letting?
2. Is the income taxable, exempt, or a mix?
3. Is the entity registered, or required to be?
4. Is a trading business transferring, supporting TOGC?
5. Has the seller opted to tax?
6. Could regulation force a change in the letting model, and what would that do to the VAT position?

This guide is general information, not tax advice. The boundary between holiday accommodation and residential letting is fact-specific — take specialist VAT advice.