Businesses facilitating holiday time-share exchanges to get VAT refund worth thousands of pounds

Further to a recent court case involving RCI Europe, operators which assist with time-share exchanges for properties located outside the UK may be in line for a valuable VAT refund.  The ruling means that fees for such exchanges should be subject to VAT according to the location of the timeshare owner’s property.

“This decision could mean a VAT refund worth thousands of pounds for the growing number of UK businesses which facilitate time-share exchanges. It could also be good news for organisations which offer fractional ownership on a portfolio of properties.

“This new and expanding part of the tourist industry helps the many people with a holiday home who wish to swap their right to a holiday at one property for a holiday in another property. Put simply, the ruling concerns those businesses who assist this exchange process,” said Hannah Dobson, VAT director at Smith & Williamson, accountants and financial services group.

Where the owner’s property in question is located outside the EU, the European Court of Justice has ruled that the exchange service should not be liable to VAT. However, VAT should be charged if the owner’s time-share property being exchanged is located within the EU. In such cases, the local VAT rate would apply.  Any operator that has charged UK VAT to date on relevant services to non UK property owners should seek to recover this VAT retrospectively (subject to the 3 year capping rules).

“Although this is a good news story for many UK businesses, those who deal with property across the EU will have to get up to speed with differing rates of VAT applied by different countries. UK businesses may need to register for VAT with the respective EU countries and be sure to charge the correct amount of local VAT. This could be an administrative headache for smaller firms,” added Hannah.

The decision regarding VAT on the exchange of time-share accommodation, was based on the view that the enrolment and subscription of fees were paid by members of the scheme to take part in the timeshare exchange and RCI supplied the service of facilitating this exchange.  The enrolment and subscription ‘services’ were ancillary to the main service of participating in the exchange of property usage rights. On this basis, RCI made one single supply of facilitating the exchange of property rights which was inextricably linked with the owner’s right to use his owned property. The location of the owner’s property, not the location of the operator, determined the place where VAT should be payable.

For further information:

Hannah Dobson, VAT director, Smith & Williamson, the accountancy and financial services group

Tel 020 7131 8138

Hannah.dobson@smith.williamson.co.uk

PR queries:

Kate Harrison 020 7131 4228

Disclaimer

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

Note to editors

Smith & Williamson is an independent professional and financial services group employing over 1,500 people. The group is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices and mid-to-large corporates. The group operates from offices in London, Belfast, Birmingham, Bristol, Dublin, Glasgow, Guildford, Maidstone, Salisbury, Southampton, and Worcester.

Smith & Williamson Limited

Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International