Property types and scenarios

VAT on Hotels and Leisure Assets

PropertyVAT Team · Updated 21 October 2026 · 3 min read

Hotels sit in an unusual position. The general rule is that supplies of land are exempt — but hotel accommodation is a specific exception, and that exception reshapes the whole VAT picture.

The exception that helps you

The provision of hotel and similar accommodation is standard-rated, not exempt.

So a hotel operator is making taxable supplies as a matter of course. They charge VAT on rooms, and they can generally recover input tax on their costs.

Compare that with care homes, where supplies are generally exempt and recovery can be blocked entirely. Two asset classes that both look like "operational property with beds" have opposite VAT profiles.

For a hotel buyer, this means VAT on a purchase is usually a timing problem you can fund, not a permanent cost you have to absorb into the price.

You are usually buying a business

The bigger feature of hotel transactions is that the asset rarely transfers alone. A typical sale includes:

• The building
• Forward bookings
• Staff, under TUPE
• Goodwill, branding and any franchise arrangements
• Stock, fixtures and operating equipment
• Licences and registrations

That is a trading business, which is why hotel sales are frequently structured as transfers of a going concern.

Where TOGC treatment applies, the sale falls outside the scope of VAT — no VAT to fund at completion, and no transaction tax on VAT that was never charged.

TOGC on a trading business

The analysis differs from a simple let investment. The conditions still have to be satisfied, but the focus shifts:

The "no significant break" point is usually straightforward here, because hotels tend to trade through completion with guests in residence.

The one that still catches buyers is the fourth. If the seller has opted to tax, the buyer generally needs their own option, notified by the relevant date. The seller's option does not transfer.

Where TOGC will not apply

A closed hotel. No trade, no bookings, no staff — there may be no business to transfer. The VAT position then turns on the ordinary rules: has the seller opted, or is the building new?

Buying to convert. If you intend to turn the hotel into flats or offices, you are not continuing the same kind of business. TOGC is unlikely, and your recovery position depends on what your onward supplies will be — zero-rated sales of new dwellings, or exempt residential letting.

A sale and leaseback, or an operator change. The character of what is transferring may differ from what it appears to be.

The wider leisure sector

The hotel exception does not extend automatically to everything in leisure. Treatment varies across the sector — holiday accommodation, caravan and camping pitches, gyms, visitor attractions and serviced apartments each have their own rules and their own edge cases.

Do not reason from "hotels are standard-rated" to a conclusion about a holiday park or an aparthotel. Establish the treatment for the specific asset and the specific supplies.

What to establish

1. Is a trading business transferring, or just a building?
2. Is TOGC treatment intended, and what must you do by when?
3. Has the seller opted to tax? Get the notification and acknowledgement.
4. Is your buying entity VAT registered?
5. How is the consideration allocated between property, goodwill, stock and equipment?
6. If TOGC fails, who bears the VAT, and can you fund it?

Point five is worth attention in this sector specifically. Hotel sales allocate price across several categories, and the allocation affects both the VAT analysis and the transaction tax. It should be agreed and documented, not left to the completion statement.

This guide is general information, not tax advice. Hotel and leisure VAT involves trading business and TOGC analysis — take specialist advice before exchange.