Irish Hotels Federation VAT Workshop

1. Irish Hotels FederationVAT Workshop Jilly McCullagh Partner VAT2Solutions Direct Line: 01 8418888 Mobile: 0868398395

2. VAT on commission payments post 1.1.10 Commission payments to Irish agents Commission payments to agents outside Ireland Self billing – what is this and what are the benefits? Sale of hotel rooms through online booking engines Merchant Model Commission Model Booking Fees VAT and Travel Agents Margin Scheme – does this apply to you? TAMS VAT and Qualifying Conferences VAT – Deposits VAT Hot Topics – Tea and Coffee reclaims VAT and Tips / Service Charges VAT and Property agenda

3. VAT on commission payments Position in 2009 Sale of hotel room €200 10% commission €20 Net payment received by hotel €180 VAT was not charged and invoices were not raised

4. VAT on commission payments Position in 2010 Sale of hotel room €200 10% commission €20 VAT on commission @ 21% €4.20 Net payment received by hotel €175.80 VAT now applicable and VAT invoices must be raised and issued.

5. Commission payments to Irish agents Commission payments made in 2010 will be plus 21% It does not matter if the booking was made in 2009, if the commission is paid in 2010 the commission is still plus 21%

6. Commission payments to agents outside Ireland Where a non Irish agent is paid commission the agent should issue an invoice without local VAT Hotel, as the recipient of the service, must self account for VAT. Add on 21% VAT and declare in boxes T1 and T2

7. Self billing – what is this and what are the benefits to you? Rather than the agent raising an invoice for the commission if it is paid under self billing the hotel raises an invoice on behalf of the agent Major benefit for hotel is that because you create the invoice you can automatically reclaim the VAT Major benefit for agent is that hotel will raise and issue VAT invoices Remember, VAT liability still remains with the agent

8. Self Billing – if you want to adopt this what must you do? Hotel must write to each agent and provide an agreement requesting confirmation that the agent agrees to abide by the self billing obligations: Provide details of agents VAT registration number Provide signed authorisation that agent agrees for the hotel to raise and issue invoices on their behalf Agent to notify the hotel if VAT status changes – i.e. they are no longer VAT registered, they sell the business etc.

9. Merchant Model – online booking engine purchases hotel room and sells on the room to the client Hotel sells room and accounts for 13.5% VAT to Revenue Online booking engine can recover the VAT you charge but must charge 13.5% VAT on sale and pay to Revenue Sale of hotel rooms through online booking engine

10. Commission model – online booking engine receives a commission and the hotel sells the accommodation to the client As before, commission paid to an Irish agent is now plus 21% VAT Be careful, hotel must pay VAT on the amount paid by the client. Make sure you do not reduce the room price by the commission paid to agent Sale of hotel rooms through online booking engine

11. Booking fees – if the online booking engine is merely providing a booking services its booking fee is subject to VAT at 21% The capacity in which the online booking engine works will be determined by the contract it has with the hotel and the nature of the services provided It should clearly state whether it acts as a merchant, agent or merely provides a booking service Sale of hotel room through online booking engine

12. Does this apply to you? If you sell hotel accommodation within a package of other services that are ‘bought in’ from third parties you may be in TAMS Unlike sale of hotel rooms the margin is taxed at standard rate (21%) VAT & Travel Agents Margin Scheme “TAMS”

13. Hotel and coach tours Hotel and golf packages If hotel sells a package with hotel accommodation, coach tours, guides etc this package could be within TAMS Hotel treated under normal rules but margin on bought in services taxed at 21% TAMS - examples

14. Lets Explore Galway – package price €500 pp 5 nights accommodation Trip to the Aran Islands Coach trips to Connemara, Galway city and environs Experienced guide throughout Additional services are bought in services and the mark up applied to these is taxed at 21% We can work through this TAMS - example

15. This is becoming more prevalent especially if you deal with conference organisers / event managers Businesses have become more aware of the possibility to recover VAT charged on QC accommodation VAT & Qualifying Conferences

16. More than 50 delegates, venue designed and constructed for the purposes of hosting more than 50 delegates Person who arranges the conference must send notification to each attendee Location and dates Nature of the business Number of delegates Name and address and VAT number of the organiser What is a Qualifying Conference

17. Following the Eugenie les Bains case the VAT treatment of forfeited deposits changed Previously, VAT that was paid to Revenue on receipt of a deposit that was forfeited was not repaid to the hotel E les B said that VAT was not due on the deposit if the deposit was a security deposit and was not a payment for some other service VAT - Deposits

18. Revenues implementation of the case was to require the hotel to account for VAT on the receipt of the deposit but to REFUND that VAT if: The deposit was forfeited Supply does not take place owing to customer cancellation The cancellation is recorded as such in the books and records of the hotel No other consideration, benefit or supply is provided to the customer Deposits

19. You can reduce your output VAT by the VAT previously paid to Revenue in the VAT period when you record the cancellation in your records Deposit of €10,000 for wedding taken in Jan 09 for Aug 10 Cancelled in Jan 10 Criteria met VAT reduction made in Jan/Feb 10 VAT return Deposits

20. Where a customer fails to pay for a supply on which you have already paid VAT you are entitled to recover this VAT by way of a bad debt relief claim Bad debt relief claim is made by reducing output VAT in the period in which the debt is written off in the accounts Bad Debts

21. Must take reasonable steps to recover debt, the debt is allowable for CT purposes, the debt is written off in the financial accounts, and you are not connected to the debtor BDR - Conditions

22. VAT recovery opportunity to recover VAT paid on sales of tea and coffee up to 1 December 2008 Revenue required VAT to be accounted at 13.5% on sales of tea and coffee I believe the zero rate should have been applied Going through the courts at the moment Tea & Coffee

23. Have you looked at this? Have you submitted a claim to protect your position Nothing to lose in submitting a claim Tea & Coffee

24. Historic Revenue concession that VAT would not be due on service charges if service charge was handed out in full amongst the staff From 1 September 2008 this concession was withdrawn Voluntary tips that are not included in the bill are still not subject to VAT VAT & Tips/Service Charges

25. VAT on sales Exempt sales are land not developed in the past 20 years, old properties, old buildings, used properties, used buildings If a sale is exempt parties to the sale can agree to opt to tax and charge VAT on the sale Major benefit of opting to tax is that vendor will not have a claw back of VAT recovered on purchasing or developing the property VAT & Property

26. Capital Goods Scheme Properties / Buildings have a VAT life of 20 years If you sell within the 20 year period and the sale is exempt there will be a claw back of some of the VAT that you recovered when purchasing VAT on Property

27. Capital Goods Scheme Properties / Buildings have a VAT life of 10 years for refurbishment If you sell within the 10 year period and the sale is exempt there will be a claw back of some of the VAT that you recovered when refurbishing VAT on Property

28. Suggest that you keep a VAT property record for the hotel containing information on Date of Purchase Purchase VAT Date of Refurbishment (1) Refurbishment VAT (1) Date of Refurbishment (2) Refurbishment VAT (2) etc VAT on Property

29. Questions?

30. The information contained within these slides is for presentation purposes only. While every effort has been made to ensure the accuracy of the material no responsibility is accepted for loss or damage occasioned by any person acting or refraining from acting as a result of this material. Professional advice should always be sought before acting on any of the information contained within these slides.