Is There VAT on Hotel Rooms?

This is a question I am asked regularly by business owners, employees who travel for work, and individuals trying to understand why hotel bills look the way they do. Hotels feel similar to rent or accommodation, which many people know can be VAT exempt, so it often comes as a surprise when VAT appears on a hotel invoice.

In this article I will explain clearly whether VAT applies to hotel rooms in the UK, how much VAT is charged, why hotels are treated differently from residential property, and what this means in practice for businesses and individuals. I will also cover related charges such as meals, parking, and extras, which often cause confusion. Everything here reflects current UK VAT treatment as applied by HM Revenue & Customs and guidance published via GOV.UK, combined with what I see day to day in real bookkeeping and VAT returns.

The short answer

Yes, there is VAT on hotel rooms in the UK.

Hotel accommodation is normally subject to VAT at the standard rate of 20 percent.

This applies whether the guest is an individual, an employee staying for work, or a business booking rooms for staff or clients.

Why hotel rooms are subject to VAT

To understand why VAT applies to hotels, it helps to understand how VAT treats different types of property.

UK VAT law draws a clear distinction between:

Residential accommodation

Temporary or short term accommodation

Residential accommodation, such as renting a flat or house to live in, is usually VAT exempt. Hotel accommodation, however, is classed as short term accommodation, which is treated as a taxable supply.

Hotels are providing more than just a place to live. They are providing a package of services, including cleaning, reception services, security, and often additional facilities. Because of this, hotel stays fall squarely within the VAT system.

How much VAT is charged on hotel rooms

The standard VAT rate of 20 percent applies to hotel room charges in most situations.

This means:

If a room costs £100 per night excluding VAT, the total including VAT is £120

If a room is advertised at £120 including VAT, £20 of that amount is VAT

Hotels usually quote prices inclusive of VAT for consumers, but invoices for business customers often show the VAT separately.

Temporary VAT reductions and why they matter

From time to time, VAT rates on hotel accommodation have been temporarily reduced.

For example, during the pandemic the UK government introduced a reduced VAT rate for hospitality, including hotels, to support the sector.

These reductions were temporary and have now ended. The current position is that hotel accommodation is back at the standard rate of 20 percent.

This is important, because using an outdated VAT rate is a common error I still see in some records.

What counts as hotel accommodation for VAT purposes

Hotel accommodation is not limited to traditional hotels.

For VAT purposes, standard rated accommodation includes:

Hotels

Guest houses

Bed and breakfast accommodation

Inns and pubs offering rooms

Hostels

Serviced apartments used for short stays

Holiday accommodation such as lodges and chalets

If the accommodation is provided on a short term basis, it is usually subject to VAT.

When accommodation may not be standard rated

There are limited situations where accommodation is not standard rated.

Examples can include:

Long term residential lets

Permanent occupation arrangements

Certain care or supported accommodation

However, these are exceptions rather than the rule, and they are very fact specific.

In practice, if you are staying somewhere that feels like a hotel, the accommodation is almost certainly subject to VAT.

VAT on hotel rooms for business travel

For businesses, hotel VAT is usually reclaimable, provided the business is VAT registered and the stay is for business purposes.

This includes:

Employees staying overnight for work

Directors travelling on business

Staff attending training or conferences

Temporary accommodation while working away from home

As long as the expense is wholly and exclusively for business, VAT on hotel accommodation can normally be reclaimed.

What evidence is needed to reclaim VAT on hotel rooms

To reclaim VAT on hotel accommodation, you must hold a valid VAT receipt or VAT invoice.

A proper hotel VAT invoice should show:

The hotel’s name and address

The hotel’s VAT registration number

The date of the stay

A description of the accommodation

The net amount

The VAT amount

The total including VAT

A booking confirmation or card receipt is not enough on its own.

If VAT is not shown separately, or the VAT number is missing, HMRC can disallow the reclaim.

Can you reclaim VAT on hotel rooms for employees

Yes, VAT can usually be reclaimed on hotel rooms booked for employees, as long as the stay is for business reasons.

This applies whether:

The company books and pays directly

The employee pays and claims expenses

The stay is domestic or overseas, subject to local VAT rules

The key requirement is that the stay is necessary for work, not a personal benefit.

VAT on hotel rooms for directors

The position for directors is the same as for employees.

If the director stays in a hotel for business purposes, the VAT is normally reclaimable.

If the stay is personal, or combined with a holiday, VAT should not be reclaimed, or should be apportioned where appropriate.

When VAT on hotel rooms is not reclaimable

There are situations where VAT on hotel accommodation cannot be reclaimed.

Common examples include:

The business is not VAT registered

The stay is for personal reasons

The accommodation is provided as part of staff entertainment

The invoice does not meet VAT invoice requirements

VAT on entertaining non employees is generally not reclaimable, even if it involves accommodation.

VAT on overseas hotel stays

Overseas hotel VAT is often misunderstood.

Key points to understand are:

UK VAT does not apply to overseas hotels

Local VAT or sales tax may be charged instead

Overseas VAT is usually not reclaimable through the UK VAT return

In some cases, overseas VAT can be reclaimed through separate refund schemes, but this is a specialist process and not automatic.

VAT on additional hotel charges

Hotel bills often include more than just the room.

Common additional charges include:

Breakfast

Other meals

Room service

Parking

Mini bar items

Spa or leisure facilities

Each of these may have a different VAT treatment.

VAT on hotel meals and breakfast

Meals provided by hotels are normally subject to VAT at the standard rate.

If breakfast is included as part of the room rate, it is usually treated as part of the accommodation and taxed at the same rate.

If breakfast is charged separately, it should still be standard rated in most cases.

From a VAT reclaim perspective, meals provided to employees while travelling for work are usually reclaimable, whereas meals that count as entertaining are not.

VAT on hotel parking

Hotel parking is usually subject to VAT at the standard rate.

VAT on parking can usually be reclaimed if the stay is for business purposes.

Again, a valid VAT invoice is required.

VAT on service charges and extras

Service charges added by hotels are normally subject to VAT.

Other extras, such as spa treatments or leisure activities, are usually standard rated as well.

These should be shown separately on the invoice, with VAT clearly identified.

Long stays and VAT

Longer stays can sometimes blur the line between hotel accommodation and residential accommodation.

However, even extended hotel stays are usually treated as standard rated accommodation, particularly where services such as cleaning and reception remain available.

It is rare for hotel stays to become VAT exempt purely due to length, although specialist advice may be needed in unusual cases.

VAT on hotel rooms and the Flat Rate Scheme

If a business uses the VAT Flat Rate Scheme, the treatment is slightly different.

Under the Flat Rate Scheme:

You still pay VAT to the hotel

You usually cannot reclaim VAT on expenses

Hotel VAT becomes a real cost

This can make business travel more expensive for flat rate users, and it is something I often factor into scheme reviews.

Common mistakes I see with hotel VAT

These issues come up repeatedly in practice:

Trying to reclaim VAT without a VAT invoice

Reclaiming VAT on personal hotel stays

Reclaiming VAT on entertaining clients

Treating overseas VAT as UK VAT

Assuming all accommodation is VAT exempt

Most of these errors are unintentional, but HMRC still expects them to be corrected.

How HMRC checks hotel VAT claims

During VAT inspections, HMRC often looks closely at travel and subsistence costs.

They may:

Request hotel invoices

Check who stayed and why

Review expense policies

Look for signs of personal use or entertaining

Clear records and proper invoices make these checks far easier to deal with.

Why hotel accommodation remains standard rated

Hotel accommodation is standard rated because it is seen as a commercial service rather than a basic housing need.

The VAT system aims to tax discretionary spending more heavily than essentials, and short term accommodation falls into that category.

This policy has remained consistent for many years, despite temporary reliefs in exceptional circumstances.

Final thoughts on VAT and hotel rooms

So, is there VAT on hotel rooms in the UK?

Yes, hotel accommodation is normally subject to VAT at 20 percent

VAT can usually be reclaimed for business stays

A valid VAT invoice is essential

Additional charges may have their own VAT treatment

Hotel VAT is an area where the rules are relatively clear, but mistakes still happen due to assumptions and poor paperwork. Understanding how VAT applies, and keeping proper records, helps avoid disallowed claims and unnecessary problems later.

If you ever see a hotel invoice that does not show VAT clearly, or applies an unexpected rate, it is worth querying it straight away rather than trying to fix it after the VAT return has been submitted.