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Was the supply of accommodation exempt residential accommodation or in a ‘hotel or similar establishment’?

By Andrew Needham, February 2024

The appellant owned a property comprising 656 self-contained apartments and some commercial units. 421 of these apartments were let on long leases, as to which no issue arose. This appeal was concerned with the VAT treatment of the letting of the remaining 235 apartments.   

The appellant contended that the letting out of the apartments was an exempt supply of accommodation. Related services at all material times were separately provided by Chelsea Cloisters Services Limited (CCSL), a company under common ownership with the appellant, to the occupiers of the apartments. Those supplies have throughout been treated as taxable at the standard rate. 

HMRC contended that the use of the apartments was carved out of the exemption in Item 1 by excepted item (d), which applies to "the provision in an hotel, inn, boarding house or similar establishment of sleeping accommodation". Note 9 to Group 1, Schedule 9 of the VAT Act 1994 provides

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